Correlation Between Financial Services and Leisure Fund
Can any of the company-specific risk be diversified away by investing in both Financial Services and Leisure 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 Financial Services and Leisure Fund into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Financial Services Fund and Leisure Fund Investor, you can compare the effects of market volatilities on Financial Services and Leisure 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 Financial Services with a short position of Leisure Fund. Check out your portfolio center. Please also check ongoing floating volatility patterns of Financial Services and Leisure Fund.
Diversification Opportunities for Financial Services and Leisure Fund
0.95 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Financial and Leisure is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding Financial Services Fund and Leisure Fund Investor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Leisure Fund Investor and Financial Services 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 Financial Services Fund are associated (or correlated) with Leisure Fund. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Leisure Fund Investor has no effect on the direction of Financial Services i.e., Financial Services and Leisure Fund go up and down completely randomly.
Pair Corralation between Financial Services and Leisure Fund
Assuming the 90 days horizon Financial Services Fund is expected to generate 1.01 times more return on investment than Leisure Fund. However, Financial Services is 1.01 times more volatile than Leisure Fund Investor. It trades about 0.13 of its potential returns per unit of risk. Leisure Fund Investor is currently generating about 0.09 per unit of risk. If you would invest 6,785 in Financial Services Fund on September 2, 2024 and sell it today you would earn a total of 3,624 from holding Financial Services Fund or generate 53.41% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Financial Services Fund vs. Leisure Fund Investor
Performance |
| Timeline |
| Financial Services |
| Leisure Fund Investor |
Financial Services and Leisure Fund Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Financial Services and Leisure Fund
The main advantage of trading using opposite Financial Services and Leisure Fund positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Financial Services position performs unexpectedly, Leisure 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 Leisure Fund will offset losses from the drop in Leisure Fund's long position.| Financial Services vs. Basic Materials Fund | Financial Services vs. Basic Materials Fund | Financial Services vs. Banking Fund Class | Financial Services vs. Basic Materials Fund |
| Leisure Fund vs. Retailing Fund Investor | Leisure Fund vs. Financial Services Fund | Leisure Fund vs. Banking Fund Investor | Leisure Fund vs. Health Care 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .
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