Correlation Between Financial Services and General Money
Can any of the company-specific risk be diversified away by investing in both Financial Services and General Money 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 General Money 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 General Money Market, you can compare the effects of market volatilities on Financial Services and General Money 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 General Money. Check out your portfolio center. Please also check ongoing floating volatility patterns of Financial Services and General Money.
Diversification Opportunities for Financial Services and General Money
0.0 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Financial and General is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Financial Services Portfolio and General Money Market in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on General Money Market 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 General Money. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of General Money Market has no effect on the direction of Financial Services i.e., Financial Services and General Money go up and down completely randomly.
Pair Corralation between Financial Services and General Money
If you would invest 911.00 in Financial Services Portfolio on October 20, 2024 and sell it today you would earn a total of 48.00 from holding Financial Services Portfolio or generate 5.27% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Flat |
| Strength | Insignificant |
| Accuracy | 95.24% |
| Values | Daily Returns |
Financial Services Portfolio vs. General Money Market
Performance |
| Timeline |
| Financial Services |
| General Money Market |
Financial Services and General Money Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Financial Services and General Money
The main advantage of trading using opposite Financial Services and General Money positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Financial Services position performs unexpectedly, General Money 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 General Money will offset losses from the drop in General Money's long position.The idea behind Financial Services Portfolio and General Money Market 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.
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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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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