Correlation Between Regional Bank and Banking Fund
Can any of the company-specific risk be diversified away by investing in both Regional Bank and Banking Fund 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 Regional Bank and Banking Fund into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Regional Bank Fund and Banking Fund Class, you can compare the effects of market volatilities on Regional Bank and Banking Fund 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 Regional Bank with a short position of Banking Fund. Check out your portfolio center. Please also check ongoing floating volatility patterns of Regional Bank and Banking Fund.
Diversification Opportunities for Regional Bank and Banking Fund
0.99 | Correlation Coefficient |
No risk reduction
The 3 months correlation between Regional and Banking is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding Regional Bank Fund and Banking Fund Class in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Banking Fund Class and Regional Bank 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 Regional Bank Fund are associated (or correlated) with Banking Fund. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Banking Fund Class has no effect on the direction of Regional Bank i.e., Regional Bank and Banking Fund go up and down completely randomly.
Pair Corralation between Regional Bank and Banking Fund
Assuming the 90 days horizon Regional Bank is expected to generate 1.38 times less return on investment than Banking Fund. In addition to that, Regional Bank is 1.12 times more volatile than Banking Fund Class. It trades about 0.03 of its total potential returns per unit of risk. Banking Fund Class is currently generating about 0.05 per unit of volatility. If you would invest 7,210 in Banking Fund Class on September 2, 2024 and sell it today you would earn a total of 2,560 from holding Banking Fund Class or generate 35.51% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Regional Bank Fund vs. Banking Fund Class
Performance |
| Timeline |
| Regional Bank |
| Banking Fund Class |
Regional Bank and Banking Fund Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Regional Bank and Banking Fund
The main advantage of trading using opposite Regional Bank and Banking Fund positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Regional Bank position performs unexpectedly, Banking Fund 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 Banking Fund will offset losses from the drop in Banking Fund's long position.| Regional Bank vs. Fidelity Small Cap | Regional Bank vs. Mid Cap Value Profund | Regional Bank vs. Queens Road Small | Regional Bank vs. Ultramid Cap Profund Ultramid Cap |
| Banking Fund vs. Davis Financial Fund | Banking Fund vs. Prudential Jennison Financial | Banking Fund vs. Angel Oak Financial | Banking Fund vs. Fidelity Advisor Financial |
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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.
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