Correlation Between Financial Select and Exchange Traded
Can any of the company-specific risk be diversified away by investing in both Financial Select and Exchange Traded 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 Exchange Traded 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 Exchange Traded Concepts, you can compare the effects of market volatilities on Financial Select and Exchange Traded 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 Exchange Traded. Check out your portfolio center. Please also check ongoing floating volatility patterns of Financial Select and Exchange Traded.
Diversification Opportunities for Financial Select and Exchange Traded
0.67 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Financial and Exchange is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Financial Select Sector and Exchange Traded Concepts in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Exchange Traded Concepts 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 Exchange Traded. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Exchange Traded Concepts has no effect on the direction of Financial Select i.e., Financial Select and Exchange Traded go up and down completely randomly.
Pair Corralation between Financial Select and Exchange Traded
Considering the 90-day investment horizon Financial Select Sector is expected to generate 1.41 times more return on investment than Exchange Traded. However, Financial Select is 1.41 times more volatile than Exchange Traded Concepts. It trades about 0.09 of its potential returns per unit of risk. Exchange Traded Concepts is currently generating about 0.01 per unit of risk. If you would invest 3,379 in Financial Select Sector on August 26, 2024 and sell it today you would earn a total of 1,694 from holding Financial Select Sector or generate 50.13% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 31.99% |
| Values | Daily Returns |
Financial Select Sector vs. Exchange Traded Concepts
Performance |
| Timeline |
| Financial Select Sector |
| Exchange Traded Concepts |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Financial Select and Exchange Traded Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Financial Select and Exchange Traded
The main advantage of trading using opposite Financial Select and Exchange Traded positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Financial Select position performs unexpectedly, Exchange Traded 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 Exchange Traded will offset losses from the drop in Exchange Traded'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 |
| Exchange Traded vs. Argent Mid Cap | Exchange Traded vs. Calumet Specialty Products | Exchange Traded vs. Loop Industries | Exchange Traded vs. Hurco Companies |
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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.
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