Correlation Between American High and Financials Ultrasector
Can any of the company-specific risk be diversified away by investing in both American High and Financials Ultrasector 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 American High and Financials Ultrasector into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between American High Income and Financials Ultrasector Profund, you can compare the effects of market volatilities on American High and Financials Ultrasector 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 American High with a short position of Financials Ultrasector. Check out your portfolio center. Please also check ongoing floating volatility patterns of American High and Financials Ultrasector.
Diversification Opportunities for American High and Financials Ultrasector
0.68 | Correlation Coefficient |
Poor diversification
The 3 months correlation between American and Financials is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding American High Income and Financials Ultrasector Profund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Financials Ultrasector and American High 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 American High Income are associated (or correlated) with Financials Ultrasector. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Financials Ultrasector has no effect on the direction of American High i.e., American High and Financials Ultrasector go up and down completely randomly.
Pair Corralation between American High and Financials Ultrasector
Assuming the 90 days horizon American High is expected to generate 30.48 times less return on investment than Financials Ultrasector. But when comparing it to its historical volatility, American High Income is 16.66 times less risky than Financials Ultrasector. It trades about 0.19 of its potential returns per unit of risk. Financials Ultrasector Profund is currently generating about 0.34 of returns per unit of risk over similar time horizon. If you would invest 3,984 in Financials Ultrasector Profund on September 3, 2024 and sell it today you would earn a total of 646.00 from holding Financials Ultrasector Profund or generate 16.21% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
American High Income vs. Financials Ultrasector Profund
Performance |
| Timeline |
| American High Income |
| Financials Ultrasector |
American High and Financials Ultrasector Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American High and Financials Ultrasector
The main advantage of trading using opposite American High and Financials Ultrasector positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American High position performs unexpectedly, Financials Ultrasector 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 Financials Ultrasector will offset losses from the drop in Financials Ultrasector's long position.| American High vs. Financials Ultrasector Profund | American High vs. Mesirow Financial Small | American High vs. Angel Oak Financial | American High vs. Fidelity Advisor Financial |
| Financials Ultrasector vs. American Century Etf | Financials Ultrasector vs. Boston Partners Small | Financials Ultrasector vs. Heartland Value Plus | Financials Ultrasector vs. Royce Opportunity Fund |
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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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