Correlation Between Consumer Finance and Brokerage
Can any of the company-specific risk be diversified away by investing in both Consumer Finance and Brokerage 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 Consumer Finance and Brokerage into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Consumer Finance Portfolio and Brokerage And Investment, you can compare the effects of market volatilities on Consumer Finance and Brokerage 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 Consumer Finance with a short position of Brokerage. Check out your portfolio center. Please also check ongoing floating volatility patterns of Consumer Finance and Brokerage.
Diversification Opportunities for Consumer Finance and Brokerage
0.97 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Consumer and Brokerage is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding Consumer Finance Portfolio and Brokerage And Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Brokerage And Investment and Consumer Finance 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 Consumer Finance Portfolio are associated (or correlated) with Brokerage. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Brokerage And Investment has no effect on the direction of Consumer Finance i.e., Consumer Finance and Brokerage go up and down completely randomly.
Pair Corralation between Consumer Finance and Brokerage
Assuming the 90 days horizon Consumer Finance is expected to generate 1.78 times less return on investment than Brokerage. In addition to that, Consumer Finance is 1.02 times more volatile than Brokerage And Investment. It trades about 0.08 of its total potential returns per unit of risk. Brokerage And Investment is currently generating about 0.15 per unit of volatility. If you would invest 11,642 in Brokerage And Investment on August 26, 2024 and sell it today you would earn a total of 7,451 from holding Brokerage And Investment or generate 64.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Consumer Finance Portfolio vs. Brokerage And Investment
Performance |
| Timeline |
| Consumer Finance Por |
| Brokerage And Investment |
Consumer Finance and Brokerage Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Consumer Finance and Brokerage
The main advantage of trading using opposite Consumer Finance and Brokerage positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Consumer Finance position performs unexpectedly, Brokerage 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 Brokerage will offset losses from the drop in Brokerage's long position.| Consumer Finance vs. Banking Portfolio Banking | Consumer Finance vs. Insurance Portfolio Insurance | Consumer Finance vs. Financial Services Portfolio | Consumer Finance vs. Automotive Portfolio Automotive |
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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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