Correlation Between Financial and Supremex
Can any of the company-specific risk be diversified away by investing in both Financial and Supremex 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 Supremex 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 Supremex, you can compare the effects of market volatilities on Financial and Supremex 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 Supremex. Check out your portfolio center. Please also check ongoing floating volatility patterns of Financial and Supremex.
Diversification Opportunities for Financial and Supremex
Good diversification
The 3 months correlation between Financial and Supremex is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding Financial 15 Split and Supremex in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Supremex 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 Supremex. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Supremex has no effect on the direction of Financial i.e., Financial and Supremex go up and down completely randomly.
Pair Corralation between Financial and Supremex
Assuming the 90 days trading horizon Financial 15 Split is expected to generate 0.19 times more return on investment than Supremex. However, Financial 15 Split is 5.24 times less risky than Supremex. It trades about 0.31 of its potential returns per unit of risk. Supremex is currently generating about -0.12 per unit of risk. If you would invest 1,032 in Financial 15 Split on September 2, 2024 and sell it today you would earn a total of 27.00 from holding Financial 15 Split or generate 2.62% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Financial 15 Split vs. Supremex
Performance |
| Timeline |
| Financial 15 Split |
| Supremex |
Financial and Supremex Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Financial and Supremex
The main advantage of trading using opposite Financial and Supremex positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Financial position performs unexpectedly, Supremex 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 Supremex will offset losses from the drop in Supremex's long position.| Financial vs. North American Financial | Financial vs. Dividend 15 Split | Financial vs. Dividend Growth Split | Financial vs. Dividend 15 Split |
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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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
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