Correlation Between Banking Fund and Sp 500
Can any of the company-specific risk be diversified away by investing in both Banking Fund and Sp 500 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 Sp 500 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 Sp 500 Fund, you can compare the effects of market volatilities on Banking Fund and Sp 500 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 Sp 500. Check out your portfolio center. Please also check ongoing floating volatility patterns of Banking Fund and Sp 500.
Diversification Opportunities for Banking Fund and Sp 500
0.88 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Banking and RYSPX is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Banking Fund Class and Sp 500 Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sp 500 Fund 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 Sp 500. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sp 500 Fund has no effect on the direction of Banking Fund i.e., Banking Fund and Sp 500 go up and down completely randomly.
Pair Corralation between Banking Fund and Sp 500
Assuming the 90 days horizon Banking Fund Class is expected to generate 3.3 times more return on investment than Sp 500. However, Banking Fund is 3.3 times more volatile than Sp 500 Fund. It trades about 0.24 of its potential returns per unit of risk. Sp 500 Fund is currently generating about 0.33 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. Sp 500 Fund
Performance |
| Timeline |
| Banking Fund Class |
| Sp 500 Fund |
Banking Fund and Sp 500 Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Banking Fund and Sp 500
The main advantage of trading using opposite Banking Fund and Sp 500 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Banking Fund position performs unexpectedly, Sp 500 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 Sp 500 will offset losses from the drop in Sp 500'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 |
| Sp 500 vs. Sp 500 Pure | Sp 500 vs. Russell 2000 Fund | Sp 500 vs. Sp Smallcap 600 | Sp 500 vs. Sp Midcap 400 |
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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.
Other Complementary Tools
| Competition Analyzer Analyze and compare many basic indicators for a group of related or unrelated entities | |
| Portfolio Center All portfolio management and optimization tools to improve performance of your portfolios | |
| Fundamental Analysis View fundamental data based on most recent published financial statements | |
| Investing Opportunities Build portfolios using our predefined set of ideas and optimize them against your investing preferences | |
| Correlation Analysis Reduce portfolio risk simply by holding instruments which are not perfectly correlated |