Correlation Between Financial Select and Avantis Core
Can any of the company-specific risk be diversified away by investing in both Financial Select and Avantis Core 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 Select and Avantis Core into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Financial Select Sector and Avantis Core Fixed, you can compare the effects of market volatilities on Financial Select and Avantis Core 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 Select with a short position of Avantis Core. Check out your portfolio center. Please also check ongoing floating volatility patterns of Financial Select and Avantis Core.
Diversification Opportunities for Financial Select and Avantis Core
-0.77 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Financial and Avantis is -0.77. Overlapping area represents the amount of risk that can be diversified away by holding Financial Select Sector and Avantis Core Fixed in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Avantis Core Fixed and Financial Select 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 Select Sector are associated (or correlated) with Avantis Core. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Avantis Core Fixed has no effect on the direction of Financial Select i.e., Financial Select and Avantis Core go up and down completely randomly.
Pair Corralation between Financial Select and Avantis Core
Considering the 90-day investment horizon Financial Select Sector is expected to generate 2.15 times more return on investment than Avantis Core. However, Financial Select is 2.15 times more volatile than Avantis Core Fixed. It trades about 0.15 of its potential returns per unit of risk. Avantis Core Fixed is currently generating about 0.05 per unit of risk. If you would invest 3,231 in Financial Select Sector on August 31, 2024 and sell it today you would earn a total of 1,903 from holding Financial Select Sector or generate 58.9% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 99.73% |
| Values | Daily Returns |
Financial Select Sector vs. Avantis Core Fixed
Performance |
| Timeline |
| Financial Select Sector |
| Avantis Core Fixed |
Financial Select and Avantis Core Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Financial Select and Avantis Core
The main advantage of trading using opposite Financial Select and Avantis Core positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Financial Select position performs unexpectedly, Avantis Core 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 Avantis Core will offset losses from the drop in Avantis Core's long position.| Financial Select vs. Energy Select Sector | Financial Select vs. Technology Select Sector | Financial Select vs. Health Care Select | Financial Select vs. Industrial Select Sector |
| Avantis Core vs. American Century ETF | Avantis Core vs. Avantis Core Municipal | Avantis Core vs. Avantis International Equity | Avantis Core vs. Avantis Emerging Markets |
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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
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