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 Investor 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
0.64 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Banking and Energy is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Banking Fund Investor 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 Investor 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 Investor is expected to generate 1.29 times more return on investment than Energy Fund. However, Banking Fund is 1.29 times more volatile than Energy Fund Investor. It trades about 0.16 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 8,569 in Banking Fund Investor on August 30, 2024 and sell it today you would earn a total of 2,899 from holding Banking Fund Investor or generate 33.83% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Banking Fund Investor vs. Energy Fund Investor
Performance |
| Timeline |
| Banking Fund Investor |
| 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. Financial Services Fund | Banking Fund vs. Health Care Fund | Banking Fund vs. Retailing Fund Investor | Banking Fund vs. Technology Fund Investor |
| Energy Fund vs. Energy Services Fund | Energy Fund vs. Basic Materials Fund | Energy Fund vs. Health Care Fund | Energy Fund vs. Precious Metals 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.
Other Complementary Tools
| Funds Screener Find actively-traded funds from around the world traded on over 30 global exchanges | |
| Insider Screener Find insiders across different sectors to evaluate their impact on performance | |
| Portfolio Dashboard Portfolio dashboard that provides centralized access to all your investments | |
| Investing Opportunities Build portfolios using our predefined set of ideas and optimize them against your investing preferences | |
| Volatility Analysis Get historical volatility and risk analysis based on latest market data |