Correlation Between Salient Alternative and Financial Services
Can any of the company-specific risk be diversified away by investing in both Salient Alternative and Financial Services 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 Salient Alternative and Financial Services into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Salient Alternative Beta and Financial Services Portfolio, you can compare the effects of market volatilities on Salient Alternative and Financial Services 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 Salient Alternative with a short position of Financial Services. Check out your portfolio center. Please also check ongoing floating volatility patterns of Salient Alternative and Financial Services.
Diversification Opportunities for Salient Alternative and Financial Services
0.85 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Salient and Financial is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Salient Alternative Beta and Financial Services Portfolio in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Financial Services and Salient Alternative 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 Salient Alternative Beta are associated (or correlated) with Financial Services. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Financial Services has no effect on the direction of Salient Alternative i.e., Salient Alternative and Financial Services go up and down completely randomly.
Pair Corralation between Salient Alternative and Financial Services
Assuming the 90 days horizon Salient Alternative is expected to generate 2.37 times less return on investment than Financial Services. But when comparing it to its historical volatility, Salient Alternative Beta is 1.48 times less risky than Financial Services. It trades about 0.14 of its potential returns per unit of risk. Financial Services Portfolio is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest 1,189 in Financial Services Portfolio on November 7, 2024 and sell it today you would earn a total of 53.00 from holding Financial Services Portfolio or generate 4.46% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Salient Alternative Beta vs. Financial Services Portfolio
Performance |
| Timeline |
| Salient Alternative Beta |
| Financial Services |
Salient Alternative and Financial Services Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Salient Alternative and Financial Services
The main advantage of trading using opposite Salient Alternative and Financial Services positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Salient Alternative position performs unexpectedly, Financial Services 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 Financial Services will offset losses from the drop in Financial Services' long position.| Salient Alternative vs. Real Estate Ultrasector | Salient Alternative vs. Amg Managers Centersquare | Salient Alternative vs. Rreef Property Trust | Salient Alternative vs. Texton Property |
| Financial Services vs. Rreef Property Trust | Financial Services vs. Vanguard Reit Index | Financial Services vs. Fidelity Real Estate | Financial Services vs. Nexpoint Real Estate |
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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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