Correlation Between Banking Portfolio and Aggressive Growth
Can any of the company-specific risk be diversified away by investing in both Banking Portfolio and Aggressive Growth 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 Banking Portfolio and Aggressive Growth into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Banking Portfolio Banking and Aggressive Growth Allocation, you can compare the effects of market volatilities on Banking Portfolio and Aggressive Growth 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 Banking Portfolio with a short position of Aggressive Growth. Check out your portfolio center. Please also check ongoing floating volatility patterns of Banking Portfolio and Aggressive Growth.
Diversification Opportunities for Banking Portfolio and Aggressive Growth
0.66 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Banking and Aggressive is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Banking Portfolio Banking and Aggressive Growth Allocation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aggressive Growth and Banking Portfolio 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 Banking Portfolio Banking are associated (or correlated) with Aggressive Growth. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aggressive Growth has no effect on the direction of Banking Portfolio i.e., Banking Portfolio and Aggressive Growth go up and down completely randomly.
Pair Corralation between Banking Portfolio and Aggressive Growth
Assuming the 90 days horizon Banking Portfolio Banking is expected to generate 4.66 times more return on investment than Aggressive Growth. However, Banking Portfolio is 4.66 times more volatile than Aggressive Growth Allocation. It trades about 0.22 of its potential returns per unit of risk. Aggressive Growth Allocation is currently generating about 0.13 per unit of risk. If you would invest 3,119 in Banking Portfolio Banking on August 30, 2024 and sell it today you would earn a total of 431.00 from holding Banking Portfolio Banking or generate 13.82% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Banking Portfolio Banking vs. Aggressive Growth Allocation
Performance |
| Timeline |
| Banking Portfolio Banking |
| Aggressive Growth |
Banking Portfolio and Aggressive Growth Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Banking Portfolio and Aggressive Growth
The main advantage of trading using opposite Banking Portfolio and Aggressive Growth positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Banking Portfolio position performs unexpectedly, Aggressive Growth 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 Aggressive Growth will offset losses from the drop in Aggressive Growth's long position.| Banking Portfolio vs. Consumer Finance Portfolio | Banking Portfolio vs. Financial Services Portfolio | Banking Portfolio vs. Insurance Portfolio Insurance | Banking Portfolio vs. Brokerage And Investment |
| Aggressive Growth vs. Mesirow Financial Small | Aggressive Growth vs. Prudential Jennison Financial | Aggressive Growth vs. Hennessy Large Cap | Aggressive Growth vs. Financials Ultrasector Profund |
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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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