Correlation Between Financial and Real Matters
Can any of the company-specific risk be diversified away by investing in both Financial and Real Matters 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 Real Matters 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 Real Matters, you can compare the effects of market volatilities on Financial and Real Matters 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 Real Matters. Check out your portfolio center. Please also check ongoing floating volatility patterns of Financial and Real Matters.
Diversification Opportunities for Financial and Real Matters
-0.67 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Financial and Real is -0.67. Overlapping area represents the amount of risk that can be diversified away by holding Financial 15 Split and Real Matters in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Real Matters 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 Real Matters. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Real Matters has no effect on the direction of Financial i.e., Financial and Real Matters go up and down completely randomly.
Pair Corralation between Financial and Real Matters
Assuming the 90 days trading horizon Financial 15 Split is expected to generate 0.15 times more return on investment than Real Matters. However, Financial 15 Split is 6.6 times less risky than Real Matters. It trades about 0.33 of its potential returns per unit of risk. Real Matters is currently generating about -0.17 per unit of risk. If you would invest 1,037 in Financial 15 Split on August 31, 2024 and sell it today you would earn a total of 28.00 from holding Financial 15 Split or generate 2.7% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Financial 15 Split vs. Real Matters
Performance |
| Timeline |
| Financial 15 Split |
| Real Matters |
Financial and Real Matters Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Financial and Real Matters
The main advantage of trading using opposite Financial and Real Matters positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Financial position performs unexpectedly, Real Matters 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 Real Matters will offset losses from the drop in Real Matters' long position.| Financial vs. iShares Canadian HYBrid | Financial vs. Brompton European Dividend | Financial vs. Solar Alliance Energy | Financial vs. PHN Multi Style All Cap |
| Real Matters vs. Mene Inc | Real Matters vs. Africa Oil Corp | Real Matters vs. Financial 15 Split | Real Matters vs. Rubicon Organics |
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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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