Correlation Between General Money and Financial Services
Can any of the company-specific risk be diversified away by investing in both General Money and Financial Services 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 General Money and Financial Services into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Money Market and Financial Services Fund, you can compare the effects of market volatilities on General Money and Financial Services 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 General Money with a short position of Financial Services. Check out your portfolio center. Please also check ongoing floating volatility patterns of General Money and Financial Services.
Diversification Opportunities for General Money and Financial Services
0.64 | Correlation Coefficient |
Poor diversification
The 3 months correlation between General and Financial is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding General Money Market and Financial Services Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Financial Services and General Money 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 General Money Market are associated (or correlated) with Financial Services. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Financial Services has no effect on the direction of General Money i.e., General Money and Financial Services go up and down completely randomly.
Pair Corralation between General Money and Financial Services
Assuming the 90 days horizon General Money is expected to generate 13.17 times less return on investment than Financial Services. But when comparing it to its historical volatility, General Money Market is 7.49 times less risky than Financial Services. It trades about 0.12 of its potential returns per unit of risk. Financial Services Fund is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest 7,936 in Financial Services Fund on September 3, 2024 and sell it today you would earn a total of 1,082 from holding Financial Services Fund or generate 13.63% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 98.46% |
| Values | Daily Returns |
General Money Market vs. Financial Services Fund
Performance |
| Timeline |
| General Money Market |
| Financial Services |
General Money and Financial Services Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with General Money and Financial Services
The main advantage of trading using opposite General Money and Financial Services positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if General Money position performs unexpectedly, Financial Services 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 Financial Services will offset losses from the drop in Financial Services' long position.| General Money vs. Vanguard Total Stock | General Money vs. Vanguard 500 Index | General Money vs. Vanguard Total Stock | General Money vs. Vanguard Total Stock |
| Financial Services vs. Blackrock Exchange Portfolio | Financial Services vs. Dws Government Money | Financial Services vs. First American Funds | Financial Services vs. General Money Market |
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 Equity Valuation module to check real value of public entities based on technical and fundamental data.
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