Correlation Between Financial Industries and Value Fund

Can any of the company-specific risk be diversified away by investing in both Financial Industries and Value Fund 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 Industries and Value Fund into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Financial Industries Fund and Value Fund I, you can compare the effects of market volatilities on Financial Industries and Value Fund 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 Industries with a short position of Value Fund. Check out your portfolio center. Please also check ongoing floating volatility patterns of Financial Industries and Value Fund.

Diversification Opportunities for Financial Industries and Value Fund

0.93

Correlation Coefficient

Financial Industries  Value Fund

Almost no diversification

The 3 months correlation between Financial and Value is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Financial Industries Fund and Value Fund I in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Value Fund I and Financial Industries 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 Industries Fund are associated (or correlated) with Value Fund. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Value Fund I has no effect on the direction of Financial Industries i.e., Financial Industries and Value Fund go up and down completely randomly.

Pair Corralation between Financial Industries and Value Fund

Assuming the 90 days horizon Financial Industries Fund is expected to generate 1.15 times more return on investment than Value Fund. However, Financial Industries is 1.15 times more volatile than Value Fund I. It trades about 0.19 of its potential returns per unit of risk. Value Fund I is currently generating about 0.21 per unit of risk. If you would invest  1,739  in Financial Industries Fund on April 28, 2025 and sell it today you would earn a total of  188.00  from holding Financial Industries Fund or generate 10.81% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	100.0%
Values	Daily Returns

Financial Industries Fund  vs.  Value Fund I

Financial Industries

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Financial Industries Fund are ranked lower than 15 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Financial Industries may actually be approaching a critical reversion point that can send shares even higher in August 2025.

Value Fund I

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Value Fund I are ranked lower than 16 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak forward indicators, Value Fund may actually be approaching a critical reversion point that can send shares even higher in August 2025.

Pair Trading with Financial Industries and Value Fund

The main advantage of trading using opposite Financial Industries and Value Fund positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Financial Industries position performs unexpectedly, Value Fund 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 Value Fund will offset losses from the drop in Value Fund's long position.

The idea behind Financial Industries Fund and Value Fund I 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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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.