Correlation Between Banking Fund and Nova Fund
Can any of the company-specific risk be diversified away by investing in both Banking Fund and Nova Fund 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 Banking Fund and Nova Fund into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Banking Fund Class and Nova Fund Class, you can compare the effects of market volatilities on Banking Fund and Nova Fund 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 Banking Fund with a short position of Nova Fund. Check out your portfolio center. Please also check ongoing floating volatility patterns of Banking Fund and Nova Fund.
Diversification Opportunities for Banking Fund and Nova Fund
0.87 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Banking and Nova is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Banking Fund Class and Nova Fund Class in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nova Fund Class and Banking Fund 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 Banking Fund Class are associated (or correlated) with Nova Fund. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nova Fund Class has no effect on the direction of Banking Fund i.e., Banking Fund and Nova Fund go up and down completely randomly.
Pair Corralation between Banking Fund and Nova Fund
Assuming the 90 days horizon Banking Fund Class is expected to generate 2.23 times more return on investment than Nova Fund. However, Banking Fund is 2.23 times more volatile than Nova Fund Class. It trades about 0.24 of its potential returns per unit of risk. Nova Fund Class is currently generating about 0.32 per unit of risk. If you would invest 8,946 in Banking Fund Class on September 2, 2024 and sell it today you would earn a total of 1,117 from holding Banking Fund Class or generate 12.49% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Banking Fund Class vs. Nova Fund Class
Performance |
| Timeline |
| Banking Fund Class |
| Nova Fund Class |
Banking Fund and Nova Fund Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Banking Fund and Nova Fund
The main advantage of trading using opposite Banking Fund and Nova Fund positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Banking Fund position performs unexpectedly, Nova Fund 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 Nova Fund will offset losses from the drop in Nova Fund's long position.| Banking Fund vs. Global Technology Portfolio | Banking Fund vs. Pgim Jennison Technology | Banking Fund vs. Towpath Technology | Banking Fund vs. Technology Ultrasector Profund |
| Nova Fund vs. Nasdaq 100 2x Strategy | Nova Fund vs. Direxion Monthly Nasdaq 100 | Nova Fund vs. Ultranasdaq 100 Profund Ultranasdaq 100 | Nova Fund vs. Nasdaq 100 2x Strategy |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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