Correlation Between Financial Services and Aggressive Balanced
Can any of the company-specific risk be diversified away by investing in both Financial Services and Aggressive Balanced 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 Financial Services and Aggressive Balanced into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Financial Services Portfolio and Aggressive Balanced Allocation, you can compare the effects of market volatilities on Financial Services and Aggressive Balanced 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 Financial Services with a short position of Aggressive Balanced. Check out your portfolio center. Please also check ongoing floating volatility patterns of Financial Services and Aggressive Balanced.
Diversification Opportunities for Financial Services and Aggressive Balanced
0.91 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Financial and Aggressive is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Financial Services Portfolio and Aggressive Balanced Allocation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aggressive Balanced and Financial 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 Financial Services Portfolio are associated (or correlated) with Aggressive Balanced. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aggressive Balanced has no effect on the direction of Financial Services i.e., Financial Services and Aggressive Balanced go up and down completely randomly.
Pair Corralation between Financial Services and Aggressive Balanced
Assuming the 90 days horizon Financial Services Portfolio is expected to generate 2.31 times more return on investment than Aggressive Balanced. However, Financial Services is 2.31 times more volatile than Aggressive Balanced Allocation. It trades about 0.26 of its potential returns per unit of risk. Aggressive Balanced Allocation is currently generating about 0.23 per unit of risk. If you would invest 1,061 in Financial Services Portfolio on August 28, 2024 and sell it today you would earn a total of 99.00 from holding Financial Services Portfolio or generate 9.33% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Financial Services Portfolio vs. Aggressive Balanced Allocation
Performance |
| Timeline |
| Financial Services |
| Aggressive Balanced |
Financial Services and Aggressive Balanced Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Financial Services and Aggressive Balanced
The main advantage of trading using opposite Financial Services and Aggressive Balanced positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Financial Services position performs unexpectedly, Aggressive Balanced 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 Aggressive Balanced will offset losses from the drop in Aggressive Balanced's long position.The idea behind Financial Services Portfolio and Aggressive Balanced Allocation pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
| Aggressive Balanced vs. Salient Alternative Beta | Aggressive Balanced vs. Moderately Aggressive Balanced | Aggressive Balanced vs. Salient Mlp Fund | Aggressive Balanced vs. Moderately Aggressive Balanced |
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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
Other Complementary Tools
| ETFs Find actively traded Exchange Traded Funds (ETF) from around the world | |
| Bonds Directory Find actively traded corporate debentures issued by US companies | |
| Global Markets Map Get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes | |
| Piotroski F Score Get Piotroski F Score based on the binary analysis strategy of nine different fundamentals | |
| Pattern Recognition Use different Pattern Recognition models to time the market across multiple global exchanges |