Correlation Between Energy Services and Banking Fund
Can any of the company-specific risk be diversified away by investing in both Energy Services and Banking 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 Energy Services and Banking Fund into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Energy Services Fund and Banking Fund Investor, you can compare the effects of market volatilities on Energy Services and Banking 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 Energy Services with a short position of Banking Fund. Check out your portfolio center. Please also check ongoing floating volatility patterns of Energy Services and Banking Fund.
Diversification Opportunities for Energy Services and Banking Fund
0.31 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Energy and Banking is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Energy Services Fund and Banking Fund Investor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Banking Fund Investor and Energy 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 Energy Services Fund are associated (or correlated) with Banking Fund. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Banking Fund Investor has no effect on the direction of Energy Services i.e., Energy Services and Banking Fund go up and down completely randomly.
Pair Corralation between Energy Services and Banking Fund
Assuming the 90 days horizon Energy Services Fund is expected to generate 0.94 times more return on investment than Banking Fund. However, Energy Services Fund is 1.06 times less risky than Banking Fund. It trades about 0.24 of its potential returns per unit of risk. Banking Fund Investor is currently generating about 0.2 per unit of risk. If you would invest 22,290 in Energy Services Fund on August 27, 2024 and sell it today you would earn a total of 2,701 from holding Energy Services Fund or generate 12.12% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Energy Services Fund vs. Banking Fund Investor
Performance |
| Timeline |
| Energy Services |
| Banking Fund Investor |
Energy Services and Banking Fund Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Energy Services and Banking Fund
The main advantage of trading using opposite Energy Services and Banking Fund positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Energy Services position performs unexpectedly, Banking 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 Banking Fund will offset losses from the drop in Banking Fund's long position.| Energy Services vs. Basic Materials Fund | Energy Services vs. Health Care Fund | Energy Services vs. Precious Metals Fund | Energy Services vs. Financial Services Fund |
| Banking Fund vs. Financial Services Fund | Banking Fund vs. Health Care Fund | Banking Fund vs. Retailing Fund Investor | Banking Fund vs. Technology Fund Investor |
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 Equity Valuation module to check real value of public entities based on technical and fundamental data.
Other Complementary Tools
| Portfolio Analyzer Portfolio analysis module that provides access to portfolio diagnostics and optimization engine | |
| Sectors List of equity sectors categorizing publicly traded companies based on their primary business activities | |
| Portfolio Center All portfolio management and optimization tools to improve performance of your portfolios | |
| Idea Optimizer Use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio | |
| Cryptocurrency Center Build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency |