Correlation Between Banking Fund and Energy Fund
Can any of the company-specific risk be diversified away by investing in both Banking Fund and Energy 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 Energy 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 Energy Fund Investor, you can compare the effects of market volatilities on Banking Fund and Energy 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 Energy Fund. Check out your portfolio center. Please also check ongoing floating volatility patterns of Banking Fund and Energy Fund.
Diversification Opportunities for Banking Fund and Energy Fund
0.65 | Correlation Coefficient |
Poor diversification
The 3 months correlation between BANKING and Energy is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Banking Fund Class and Energy Fund Investor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Energy Fund Investor 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 Energy Fund. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Energy Fund Investor has no effect on the direction of Banking Fund i.e., Banking Fund and Energy Fund go up and down completely randomly.
Pair Corralation between Banking Fund and Energy Fund
Assuming the 90 days horizon Banking Fund Class is expected to generate 1.27 times more return on investment than Energy Fund. However, Banking Fund is 1.27 times more volatile than Energy Fund Investor. It trades about 0.15 of its potential returns per unit of risk. Energy Fund Investor is currently generating about -0.01 per unit of risk. If you would invest 7,654 in Banking Fund Class on August 29, 2024 and sell it today you would earn a total of 2,474 from holding Banking Fund Class or generate 32.32% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Banking Fund Class vs. Energy Fund Investor
Performance |
| Timeline |
| Banking Fund Class |
| Energy Fund Investor |
Banking Fund and Energy Fund Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Banking Fund and Energy Fund
The main advantage of trading using opposite Banking Fund and Energy Fund positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Banking Fund position performs unexpectedly, Energy 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 Energy Fund will offset losses from the drop in Energy Fund's long position.| Banking Fund vs. John Hancock Money | Banking Fund vs. Barings Active Short | Banking Fund vs. Rbc Bluebay Global | Banking Fund vs. Angel Oak Financial |
| Energy Fund vs. HUMANA INC | Energy Fund vs. Aquagold International | Energy Fund vs. Barloworld Ltd ADR | Energy Fund vs. Morningstar Unconstrained Allocation |
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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.
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