Correlation Between Fiserv and Select Sector
Can any of the company-specific risk be diversified away by investing in both Fiserv and Select Sector 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 Fiserv and Select Sector into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Fiserv Inc and The Select Sector, you can compare the effects of market volatilities on Fiserv and Select Sector 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 Fiserv with a short position of Select Sector. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fiserv and Select Sector.
Diversification Opportunities for Fiserv and Select Sector
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Fiserv and Select is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Fiserv Inc and The Select Sector in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Select Sector and Fiserv 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 Fiserv Inc are associated (or correlated) with Select Sector. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Select Sector has no effect on the direction of Fiserv i.e., Fiserv and Select Sector go up and down completely randomly.
Pair Corralation between Fiserv and Select Sector
Assuming the 90 days trading horizon Fiserv Inc is expected to generate 0.69 times more return on investment than Select Sector. However, Fiserv Inc is 1.44 times less risky than Select Sector. It trades about 0.21 of its potential returns per unit of risk. The Select Sector is currently generating about 0.12 per unit of risk. If you would invest 252,000 in Fiserv Inc on September 1, 2024 and sell it today you would earn a total of 204,207 from holding Fiserv Inc or generate 81.03% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Fiserv Inc vs. The Select Sector
Performance |
| Timeline |
| Fiserv Inc |
| Select Sector |
Fiserv and Select Sector Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Fiserv and Select Sector
The main advantage of trading using opposite Fiserv and Select Sector positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fiserv position performs unexpectedly, Select Sector 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 Select Sector will offset losses from the drop in Select Sector's long position.| Fiserv vs. The Select Sector | Fiserv vs. Promotora y Operadora | Fiserv vs. SPDR Series Trust | Fiserv vs. iShares Trust |
| Select Sector vs. The Select Sector | Select Sector vs. The Select Sector | Select Sector vs. The Select Sector | Select Sector vs. The Select Sector |
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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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