Correlation Between Financial Industries and Moderate Balanced
Can any of the company-specific risk be diversified away by investing in both Financial Industries and Moderate Balanced 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 Moderate Balanced 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 Moderate Balanced Allocation, you can compare the effects of market volatilities on Financial Industries and Moderate Balanced 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 Moderate Balanced. Check out your portfolio center. Please also check ongoing floating volatility patterns of Financial Industries and Moderate Balanced.
Diversification Opportunities for Financial Industries and Moderate Balanced
0.87 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Financial and Moderate is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Financial Industries Fund and Moderate Balanced Allocation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Moderate Balanced 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 Moderate Balanced. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Moderate Balanced has no effect on the direction of Financial Industries i.e., Financial Industries and Moderate Balanced go up and down completely randomly.
Pair Corralation between Financial Industries and Moderate Balanced
Assuming the 90 days horizon Financial Industries Fund is expected to generate 2.21 times more return on investment than Moderate Balanced. However, Financial Industries is 2.21 times more volatile than Moderate Balanced Allocation. It trades about 0.05 of its potential returns per unit of risk. Moderate Balanced Allocation is currently generating about 0.06 per unit of risk. If you would invest 1,534 in Financial Industries Fund on November 6, 2024 and sell it today you would earn a total of 394.00 from holding Financial Industries Fund or generate 25.68% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Financial Industries Fund vs. Moderate Balanced Allocation
Performance |
| Timeline |
| Financial Industries |
| Moderate Balanced |
Financial Industries and Moderate Balanced Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Financial Industries and Moderate Balanced
The main advantage of trading using opposite Financial Industries and Moderate Balanced positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Financial Industries position performs unexpectedly, Moderate Balanced 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 Moderate Balanced will offset losses from the drop in Moderate Balanced's long position.| Financial Industries vs. Payden High Income | Financial Industries vs. Prudential High Yield | Financial Industries vs. Dunham High Yield | Financial Industries vs. Buffalo High Yield |
| Moderate Balanced vs. Redwood Real Estate | Moderate Balanced vs. Nexpoint Real Estate | Moderate Balanced vs. Amg Managers Centersquare | Moderate Balanced vs. Deutsche Real Estate |
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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.
Other Complementary Tools
| Theme Ratings Determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance | |
| Idea Analyzer Analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas | |
| Money Flow Index Determine momentum by analyzing Money Flow Index and other technical indicators | |
| Portfolio Backtesting Avoid under-diversification and over-optimization by backtesting your portfolios | |
| Money Managers Screen money managers from public funds and ETFs managed around the world |