Correlation Between Financial and Everyday People
Can any of the company-specific risk be diversified away by investing in both Financial and Everyday People 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 Everyday People 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 Everyday People Financial, you can compare the effects of market volatilities on Financial and Everyday People 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 Everyday People. Check out your portfolio center. Please also check ongoing floating volatility patterns of Financial and Everyday People.
Diversification Opportunities for Financial and Everyday People
0.41 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Financial and Everyday is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Financial 15 Split and Everyday People Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Everyday People Financial 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 Everyday People. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Everyday People Financial has no effect on the direction of Financial i.e., Financial and Everyday People go up and down completely randomly.
Pair Corralation between Financial and Everyday People
Assuming the 90 days trading horizon Financial is expected to generate 2.28 times less return on investment than Everyday People. But when comparing it to its historical volatility, Financial 15 Split is 4.18 times less risky than Everyday People. It trades about 0.06 of its potential returns per unit of risk. Everyday People Financial is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 35.00 in Everyday People Financial on September 12, 2024 and sell it today you would earn a total of 6.00 from holding Everyday People Financial or generate 17.14% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Financial 15 Split vs. Everyday People Financial
Performance |
| Timeline |
| Financial 15 Split |
| Everyday People Financial |
Financial and Everyday People Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Financial and Everyday People
The main advantage of trading using opposite Financial and Everyday People positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Financial position performs unexpectedly, Everyday People 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 Everyday People will offset losses from the drop in Everyday People's long position.| Financial vs. Dividend 15 Split | Financial vs. Dividend Growth Split | Financial vs. North American Financial | Financial vs. Life Banc Split |
| Everyday People vs. Brompton Lifeco Split | Everyday People vs. North American Financial | Everyday People vs. Prime Dividend Corp | Everyday People 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..
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