Correlation Between Financial Industries and Inverse Russell
Can any of the company-specific risk be diversified away by investing in both Financial Industries and Inverse Russell at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Financial Industries and Inverse Russell into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Financial Industries Fund and Inverse Russell 2000, you can compare the effects of market volatilities on Financial Industries and Inverse Russell and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Financial Industries with a short position of Inverse Russell. Check out your portfolio center. Please also check ongoing floating volatility patterns of Financial Industries and Inverse Russell.
Diversification Opportunities for Financial Industries and Inverse Russell
-0.91 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Financial and Inverse is -0.91. Overlapping area represents the amount of risk that can be diversified away by holding Financial Industries Fund and Inverse Russell 2000 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Inverse Russell 2000 and Financial Industries is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Financial Industries Fund are associated (or correlated) with Inverse Russell. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Inverse Russell 2000 has no effect on the direction of Financial Industries i.e., Financial Industries and Inverse Russell go up and down completely randomly.
Pair Corralation between Financial Industries and Inverse Russell
Assuming the 90 days horizon Financial Industries Fund is expected to generate 0.87 times more return on investment than Inverse Russell. However, Financial Industries Fund is 1.15 times less risky than Inverse Russell. It trades about 0.09 of its potential returns per unit of risk. Inverse Russell 2000 is currently generating about -0.04 per unit of risk. If you would invest 1,493 in Financial Industries Fund on November 9, 2024 and sell it today you would earn a total of 444.00 from holding Financial Industries Fund or generate 29.74% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Financial Industries Fund vs. Inverse Russell 2000
Performance |
| Timeline |
| Financial Industries |
| Inverse Russell 2000 |
Financial Industries and Inverse Russell Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Financial Industries and Inverse Russell
The main advantage of trading using opposite Financial Industries and Inverse Russell positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Financial Industries position performs unexpectedly, Inverse Russell can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Inverse Russell will offset losses from the drop in Inverse Russell's long position.| Financial Industries vs. Deutsche Gold Precious | Financial Industries vs. Great West Goldman Sachs | Financial Industries vs. Oppenheimer Gold Special | Financial Industries vs. The Gold Bullion |
| Inverse Russell vs. Angel Oak Financial | Inverse Russell vs. Ab Government Exchange | Inverse Russell vs. Fidelity Advisor Financial | Inverse Russell vs. Davis Financial Fund |
Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.
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