Correlation Between Themes Global and Financial Select
Can any of the company-specific risk be diversified away by investing in both Themes Global and Financial Select 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 Themes Global and Financial Select into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Themes Global Systemically and Financial Select Sector, you can compare the effects of market volatilities on Themes Global and Financial Select 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 Themes Global with a short position of Financial Select. Check out your portfolio center. Please also check ongoing floating volatility patterns of Themes Global and Financial Select.
Diversification Opportunities for Themes Global and Financial Select
0.72 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Themes and Financial is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Themes Global Systemically and Financial Select Sector in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Financial Select Sector and Themes Global 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 Themes Global Systemically are associated (or correlated) with Financial Select. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Financial Select Sector has no effect on the direction of Themes Global i.e., Themes Global and Financial Select go up and down completely randomly.
Pair Corralation between Themes Global and Financial Select
Given the investment horizon of 90 days Themes Global Systemically is expected to generate 0.97 times more return on investment than Financial Select. However, Themes Global Systemically is 1.03 times less risky than Financial Select. It trades about 0.19 of its potential returns per unit of risk. Financial Select Sector is currently generating about 0.13 per unit of risk. If you would invest 2,984 in Themes Global Systemically on November 2, 2024 and sell it today you would earn a total of 641.00 from holding Themes Global Systemically or generate 21.48% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 99.04% |
| Values | Daily Returns |
Themes Global Systemically vs. Financial Select Sector
Performance |
| Timeline |
| Themes Global System |
| Financial Select Sector |
Themes Global and Financial Select Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Themes Global and Financial Select
The main advantage of trading using opposite Themes Global and Financial Select positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Themes Global position performs unexpectedly, Financial Select 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 Select will offset losses from the drop in Financial Select's long position.| Themes Global vs. First Trust Exchange Traded | Themes Global vs. Ultimus Managers Trust | Themes Global vs. Horizon Kinetics Medical | Themes Global vs. Harbor Health Care |
| Financial Select vs. Energy Select Sector | Financial Select vs. Technology Select Sector | Financial Select vs. Health Care Select | Financial Select vs. Industrial Select Sector |
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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.
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