Correlation Between Consumer Finance and Transportation Portfolio
Can any of the company-specific risk be diversified away by investing in both Consumer Finance and Transportation Portfolio 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 Transportation Portfolio 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 Transportation Portfolio Transportation, you can compare the effects of market volatilities on Consumer Finance and Transportation Portfolio 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 Transportation Portfolio. Check out your portfolio center. Please also check ongoing floating volatility patterns of Consumer Finance and Transportation Portfolio.
Diversification Opportunities for Consumer Finance and Transportation Portfolio
0.95 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Consumer and Transportation is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding Consumer Finance Portfolio and Transportation Portfolio Trans in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Transportation Portfolio 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 Transportation Portfolio. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Transportation Portfolio has no effect on the direction of Consumer Finance i.e., Consumer Finance and Transportation Portfolio go up and down completely randomly.
Pair Corralation between Consumer Finance and Transportation Portfolio
Assuming the 90 days horizon Consumer Finance Portfolio is expected to generate 1.05 times more return on investment than Transportation Portfolio. However, Consumer Finance is 1.05 times more volatile than Transportation Portfolio Transportation. It trades about 0.38 of its potential returns per unit of risk. Transportation Portfolio Transportation is currently generating about 0.25 per unit of risk. If you would invest 1,797 in Consumer Finance Portfolio on September 1, 2024 and sell it today you would earn a total of 213.00 from holding Consumer Finance Portfolio or generate 11.85% 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. Transportation Portfolio Trans
Performance |
| Timeline |
| Consumer Finance Por |
| Transportation Portfolio |
Consumer Finance and Transportation Portfolio Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Consumer Finance and Transportation Portfolio
The main advantage of trading using opposite Consumer Finance and Transportation Portfolio positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Consumer Finance position performs unexpectedly, Transportation Portfolio 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 Transportation Portfolio will offset losses from the drop in Transportation Portfolio'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 |
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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..
Other Complementary Tools
| Aroon Oscillator Analyze current equity momentum using Aroon Oscillator and other momentum ratios | |
| Alpha Finder Use alpha and beta coefficients to find investment opportunities after accounting for the risk | |
| Price Transformation Use Price Transformation models to analyze the depth of different equity instruments across global markets | |
| Content Syndication Quickly integrate customizable finance content to your own investment portal | |
| Portfolio Analyzer Portfolio analysis module that provides access to portfolio diagnostics and optimization engine |