Correlation Between Snap and Financial Services
Can any of the company-specific risk be diversified away by investing in both Snap 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 Snap and Financial Services into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Snap Inc and Financial Services Fund, you can compare the effects of market volatilities on Snap 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 Snap with a short position of Financial Services. Check out your portfolio center. Please also check ongoing floating volatility patterns of Snap and Financial Services.
Diversification Opportunities for Snap and Financial Services
0.63 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Snap and Financial is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Snap Inc and Financial Services Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Financial Services and Snap 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 Snap Inc 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 Snap i.e., Snap and Financial Services go up and down completely randomly.
Pair Corralation between Snap and Financial Services
Given the investment horizon of 90 days Snap is expected to generate 1.05 times less return on investment than Financial Services. In addition to that, Snap is 4.54 times more volatile than Financial Services Fund. It trades about 0.03 of its total potential returns per unit of risk. Financial Services Fund is currently generating about 0.14 per unit of volatility. If you would invest 7,012 in Financial Services Fund on August 29, 2024 and sell it today you would earn a total of 3,428 from holding Financial Services Fund or generate 48.89% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Snap Inc vs. Financial Services Fund
Performance |
| Timeline |
| Snap Inc |
| Financial Services |
Snap and Financial Services Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Snap and Financial Services
The main advantage of trading using opposite Snap and Financial Services positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Snap 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.The idea behind Snap Inc and Financial Services Fund 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.| Financial Services vs. Health Care Fund | Financial Services vs. Banking Fund Investor | Financial Services vs. Technology Fund Investor | Financial Services vs. Transportation 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
Other Complementary Tools
| Technical Analysis Check basic technical indicators and analysis based on most latest market data | |
| Fundamental Analysis View fundamental data based on most recent published financial statements | |
| Companies Directory Evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals | |
| Global Correlations Find global opportunities by holding instruments from different markets | |
| Performance Analysis Check effects of mean-variance optimization against your current asset allocation |