Correlation Between Provident Financial and Capitol Federal
Can any of the company-specific risk be diversified away by investing in both Provident Financial and Capitol Federal 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 Provident Financial and Capitol Federal into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Provident Financial Services and Capitol Federal Financial, you can compare the effects of market volatilities on Provident Financial and Capitol Federal 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 Provident Financial with a short position of Capitol Federal. Check out your portfolio center. Please also check ongoing floating volatility patterns of Provident Financial and Capitol Federal.
Diversification Opportunities for Provident Financial and Capitol Federal
0.93 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Provident and Capitol is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Provident Financial Services and Capitol Federal Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Capitol Federal Financial and Provident 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 Provident Financial Services are associated (or correlated) with Capitol Federal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Capitol Federal Financial has no effect on the direction of Provident Financial i.e., Provident Financial and Capitol Federal go up and down completely randomly.
Pair Corralation between Provident Financial and Capitol Federal
Assuming the 90 days horizon Provident Financial Services is expected to generate 0.82 times more return on investment than Capitol Federal. However, Provident Financial Services is 1.22 times less risky than Capitol Federal. It trades about 0.25 of its potential returns per unit of risk. Capitol Federal Financial is currently generating about 0.14 per unit of risk. If you would invest 1,709 in Provident Financial Services on September 6, 2024 and sell it today you would earn a total of 281.00 from holding Provident Financial Services or generate 16.44% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Provident Financial Services vs. Capitol Federal Financial
Performance |
| Timeline |
| Provident Financial |
| Capitol Federal Financial |
Provident Financial and Capitol Federal Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Provident Financial and Capitol Federal
The main advantage of trading using opposite Provident Financial and Capitol Federal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Provident Financial position performs unexpectedly, Capitol Federal 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 Capitol Federal will offset losses from the drop in Capitol Federal's long position.| Provident Financial vs. FAST RETAIL ADR | Provident Financial vs. CarsalesCom | Provident Financial vs. UNIVERSAL MUSIC GROUP | Provident Financial vs. Zoom Video Communications |
| Capitol Federal vs. Territorial Bancorp | Capitol Federal vs. Superior Plus Corp | Capitol Federal vs. Origin Agritech | Capitol Federal vs. Identiv |
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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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