Correlation Between Financial and US Financial
Can any of the company-specific risk be diversified away by investing in both Financial and US Financial 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 Financial and US Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Financial 15 Split and US Financial 15, you can compare the effects of market volatilities on Financial and US Financial 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 Financial with a short position of US Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Financial and US Financial.
Diversification Opportunities for Financial and US Financial
0.81 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Financial and FTU-PB is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Financial 15 Split and US Financial 15 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on US Financial 15 and Financial 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 Financial 15 Split are associated (or correlated) with US Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of US Financial 15 has no effect on the direction of Financial i.e., Financial and US Financial go up and down completely randomly.
Pair Corralation between Financial and US Financial
Assuming the 90 days trading horizon Financial is expected to generate 1.63 times less return on investment than US Financial. But when comparing it to its historical volatility, Financial 15 Split is 5.72 times less risky than US Financial. It trades about 0.16 of its potential returns per unit of risk. US Financial 15 is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 558.00 in US Financial 15 on August 28, 2024 and sell it today you would earn a total of 201.00 from holding US Financial 15 or generate 36.02% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 99.79% |
| Values | Daily Returns |
Financial 15 Split vs. US Financial 15
Performance |
| Timeline |
| Financial 15 Split |
| US Financial 15 |
Financial and US Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Financial and US Financial
The main advantage of trading using opposite Financial and US Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Financial position performs unexpectedly, US Financial 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 US Financial will offset losses from the drop in US Financial's long position.| Financial vs. North American Financial | Financial vs. Dividend 15 Split | Financial vs. Dividend Growth Split | Financial vs. Dividend 15 Split |
| US Financial vs. North American Financial | US Financial vs. Prime Dividend Corp | US Financial vs. Canadian Life Companies | US Financial vs. Financial 15 Split |
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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.
Other Complementary Tools
| Share Portfolio Track or share privately all of your investments from the convenience of any device | |
| Pattern Recognition Use different Pattern Recognition models to time the market across multiple global exchanges | |
| Instant Ratings Determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance | |
| Commodity Channel Use Commodity Channel Index to analyze current equity momentum | |
| Portfolio Center All portfolio management and optimization tools to improve performance of your portfolios |