Correlation Between Prime Dividend and US Financial
Can any of the company-specific risk be diversified away by investing in both Prime Dividend and US Financial 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 Prime Dividend and US Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Prime Dividend Corp and US Financial 15, you can compare the effects of market volatilities on Prime Dividend and US Financial 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 Prime Dividend with a short position of US Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Prime Dividend and US Financial.
Diversification Opportunities for Prime Dividend and US Financial
0.65 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Prime and FTU-PB is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Prime Dividend Corp and US Financial 15 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on US Financial 15 and Prime Dividend 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 Prime Dividend Corp are associated (or correlated) with US Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of US Financial 15 has no effect on the direction of Prime Dividend i.e., Prime Dividend and US Financial go up and down completely randomly.
Pair Corralation between Prime Dividend and US Financial
Assuming the 90 days trading horizon Prime Dividend is expected to generate 2.19 times less return on investment than US Financial. In addition to that, Prime Dividend is 1.6 times more volatile than US Financial 15. It trades about 0.01 of its total potential returns per unit of risk. US Financial 15 is currently generating about 0.05 per unit of volatility. If you would invest 562.00 in US Financial 15 on October 19, 2024 and sell it today you would earn a total of 226.00 from holding US Financial 15 or generate 40.21% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Prime Dividend Corp vs. US Financial 15
Performance |
| Timeline |
| Prime Dividend Corp |
| US Financial 15 |
Prime Dividend and US Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Prime Dividend and US Financial
The main advantage of trading using opposite Prime Dividend and US Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Prime Dividend position performs unexpectedly, US Financial 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 US Financial will offset losses from the drop in US Financial's long position.| Prime Dividend vs. TDb Split Corp | Prime Dividend vs. Dividend Select 15 | Prime Dividend vs. Canadian Life Companies | Prime Dividend vs. Brompton Lifeco Split |
| US Financial vs. North American Financial | US Financial vs. Prime Dividend Corp | US Financial vs. Canadian Life Companies | US Financial 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.
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