Correlation Between Leisure Fund and Automotive Portfolio
Can any of the company-specific risk be diversified away by investing in both Leisure Fund and Automotive Portfolio 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 Leisure Fund and Automotive Portfolio into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Leisure Fund Investor and Automotive Portfolio Automotive, you can compare the effects of market volatilities on Leisure Fund and Automotive Portfolio 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 Leisure Fund with a short position of Automotive Portfolio. Check out your portfolio center. Please also check ongoing floating volatility patterns of Leisure Fund and Automotive Portfolio.
Diversification Opportunities for Leisure Fund and Automotive Portfolio
0.88 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Leisure and Automotive is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Leisure Fund Investor and Automotive Portfolio Automotiv in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Automotive Portfolio and Leisure 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 Leisure Fund Investor are associated (or correlated) with Automotive Portfolio. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Automotive Portfolio has no effect on the direction of Leisure Fund i.e., Leisure Fund and Automotive Portfolio go up and down completely randomly.
Pair Corralation between Leisure Fund and Automotive Portfolio
Assuming the 90 days horizon Leisure Fund Investor is expected to generate 0.76 times more return on investment than Automotive Portfolio. However, Leisure Fund Investor is 1.32 times less risky than Automotive Portfolio. It trades about 0.09 of its potential returns per unit of risk. Automotive Portfolio Automotive is currently generating about 0.04 per unit of risk. If you would invest 7,457 in Leisure Fund Investor on September 4, 2024 and sell it today you would earn a total of 2,335 from holding Leisure Fund Investor or generate 31.31% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 99.73% |
| Values | Daily Returns |
Leisure Fund Investor vs. Automotive Portfolio Automotiv
Performance |
| Timeline |
| Leisure Fund Investor |
| Automotive Portfolio |
Leisure Fund and Automotive Portfolio Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Leisure Fund and Automotive Portfolio
The main advantage of trading using opposite Leisure Fund and Automotive Portfolio positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Leisure Fund position performs unexpectedly, Automotive Portfolio 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 Automotive Portfolio will offset losses from the drop in Automotive Portfolio's long position.| 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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