Correlation Between Financial Services and Retailing Fund
Can any of the company-specific risk be diversified away by investing in both Financial Services and Retailing 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 Retailing 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 Retailing Fund Investor, you can compare the effects of market volatilities on Financial Services and Retailing 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 Retailing Fund. Check out your portfolio center. Please also check ongoing floating volatility patterns of Financial Services and Retailing Fund.
Diversification Opportunities for Financial Services and Retailing Fund
0.67 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Financial and Retailing is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Financial Services Fund and Retailing Fund Investor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Retailing 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 Retailing Fund. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Retailing Fund Investor has no effect on the direction of Financial Services i.e., Financial Services and Retailing Fund go up and down completely randomly.
Pair Corralation between Financial Services and Retailing Fund
Assuming the 90 days horizon Financial Services Fund is expected to generate 0.96 times more return on investment than Retailing Fund. However, Financial Services Fund is 1.04 times less risky than Retailing Fund. It trades about 0.09 of its potential returns per unit of risk. Retailing Fund Investor is currently generating about 0.06 per unit of risk. If you would invest 6,984 in Financial Services Fund on August 30, 2024 and sell it today you would earn a total of 3,456 from holding Financial Services Fund or generate 49.48% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Financial Services Fund vs. Retailing Fund Investor
Performance |
| Timeline |
| Financial Services |
| Retailing Fund Investor |
Financial Services and Retailing Fund Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Financial Services and Retailing Fund
The main advantage of trading using opposite Financial Services and Retailing Fund positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Financial Services position performs unexpectedly, Retailing 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 Retailing Fund will offset losses from the drop in Retailing Fund's long position.| Financial Services vs. Health Care Fund | Financial Services vs. Banking Fund Investor | Financial Services vs. Technology Fund Investor | Financial Services vs. Transportation Fund Investor |
| Retailing Fund vs. Leisure Fund Investor | Retailing Fund vs. Banking Fund Investor | Retailing Fund vs. Technology Fund Investor | Retailing Fund vs. Financial Services 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.
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