Correlation Between Banking Fund and Consumer Products
Can any of the company-specific risk be diversified away by investing in both Banking Fund and Consumer Products 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 Consumer Products 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 Consumer Products Fund, you can compare the effects of market volatilities on Banking Fund and Consumer Products 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 Consumer Products. Check out your portfolio center. Please also check ongoing floating volatility patterns of Banking Fund and Consumer Products.
Diversification Opportunities for Banking Fund and Consumer Products
-0.02 | Correlation Coefficient |
Good diversification
The 3 months correlation between Banking and Consumer is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding Banking Fund Class and Consumer Products Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Consumer Products 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 Consumer Products. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Consumer Products has no effect on the direction of Banking Fund i.e., Banking Fund and Consumer Products go up and down completely randomly.
Pair Corralation between Banking Fund and Consumer Products
Assuming the 90 days horizon Banking Fund Class is expected to under-perform the Consumer Products. But the mutual fund apears to be less risky and, when comparing its historical volatility, Banking Fund Class is 58.46 times less risky than Consumer Products. The mutual fund trades about -0.16 of its potential returns per unit of risk. The Consumer Products Fund is currently generating about 0.25 of returns per unit of risk over similar time horizon. If you would invest 3,841 in Consumer Products Fund on November 28, 2024 and sell it today you would earn a total of 7,789 from holding Consumer Products Fund or generate 202.79% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Banking Fund Class vs. Consumer Products Fund
Performance |
| Timeline |
| Banking Fund Class |
| Consumer Products |
Banking Fund and Consumer Products Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Banking Fund and Consumer Products
The main advantage of trading using opposite Banking Fund and Consumer Products positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Banking Fund position performs unexpectedly, Consumer Products 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 Consumer Products will offset losses from the drop in Consumer Products' long position.| Banking Fund vs. Buffalo High Yield | Banking Fund vs. Buffalo High Yield | Banking Fund vs. Virtus High Yield | Banking Fund vs. Simt High Yield |
| Consumer Products vs. Delaware Limited Term Diversified | Consumer Products vs. Jpmorgan Diversified Fund | Consumer Products vs. Lord Abbett Diversified | Consumer Products vs. Fulcrum Diversified Absolute |
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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.
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