Correlation Between Fundamental Large and Financial Industries
Can any of the company-specific risk be diversified away by investing in both Fundamental Large and Financial Industries 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 Fundamental Large and Financial Industries into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Fundamental Large Cap and Financial Industries Fund, you can compare the effects of market volatilities on Fundamental Large and Financial Industries 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 Fundamental Large with a short position of Financial Industries. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fundamental Large and Financial Industries.
Diversification Opportunities for Fundamental Large and Financial Industries
0.51 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Fundamental and Financial is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Fundamental Large Cap and Financial Industries Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Financial Industries and Fundamental Large 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 Fundamental Large Cap are associated (or correlated) with Financial Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Financial Industries has no effect on the direction of Fundamental Large i.e., Fundamental Large and Financial Industries go up and down completely randomly.
Pair Corralation between Fundamental Large and Financial Industries
Assuming the 90 days horizon Fundamental Large Cap is expected to generate 0.51 times more return on investment than Financial Industries. However, Fundamental Large Cap is 1.95 times less risky than Financial Industries. It trades about -0.21 of its potential returns per unit of risk. Financial Industries Fund is currently generating about -0.36 per unit of risk. If you would invest 6,895 in Fundamental Large Cap on October 14, 2024 and sell it today you would lose (303.00) from holding Fundamental Large Cap or give up 4.39% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Fundamental Large Cap vs. Financial Industries Fund
Performance |
| Timeline |
| Fundamental Large Cap |
| Financial Industries |
Fundamental Large and Financial Industries Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Fundamental Large and Financial Industries
The main advantage of trading using opposite Fundamental Large and Financial Industries positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fundamental Large position performs unexpectedly, Financial Industries 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 Industries will offset losses from the drop in Financial Industries' long position.| Fundamental Large vs. Barings Active Short | Fundamental Large vs. Aamhimco Short Duration | Fundamental Large vs. Cmg Ultra Short | Fundamental Large vs. Alpine Ultra Short |
| Financial Industries vs. Americafirst Large Cap | Financial Industries vs. Qs Large Cap | Financial Industries vs. Fundamental Large Cap | Financial Industries vs. Calvert Large Cap |
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 Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.
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