Correlation Between Financial Industries and Catalyst/smh High

Can any of the company-specific risk be diversified away by investing in both Financial Industries and Catalyst/smh High 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 Catalyst/smh High 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 Catalystsmh High Income, you can compare the effects of market volatilities on Financial Industries and Catalyst/smh High 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 Catalyst/smh High. Check out your portfolio center. Please also check ongoing floating volatility patterns of Financial Industries and Catalyst/smh High.

Diversification Opportunities for Financial Industries and Catalyst/smh High

0.86

Correlation Coefficient

Financial Industries  Catalyst/smh High

Very poor diversification

The 3 months correlation between Financial and Catalyst/smh is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Financial Industries Fund and Catalystsmh High Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Catalystsmh High Income 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 Catalyst/smh High. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Catalystsmh High Income has no effect on the direction of Financial Industries i.e., Financial Industries and Catalyst/smh High go up and down completely randomly.

Pair Corralation between Financial Industries and Catalyst/smh High

Assuming the 90 days horizon Financial Industries Fund is expected to generate 1.96 times more return on investment than Catalyst/smh High. However, Financial Industries is 1.96 times more volatile than Catalystsmh High Income. It trades about 0.2 of its potential returns per unit of risk. Catalystsmh High Income is currently generating about 0.39 per unit of risk. If you would invest  1,721  in Financial Industries Fund on April 23, 2025 and sell it today you would earn a total of  191.00  from holding Financial Industries Fund or generate 11.1% return on investment over 90 days.

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

Financial Industries Fund  vs.  Catalystsmh High Income

Financial Industries

Risk-Adjusted Performance

Solid

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.

Catalystsmh High Income

Risk-Adjusted Performance

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Catalystsmh High Income are ranked lower than 30 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak technical and fundamental indicators, Catalyst/smh High may actually be approaching a critical reversion point that can send shares even higher in August 2025.

Pair Trading with Financial Industries and Catalyst/smh High

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

The idea behind Financial Industries Fund and Catalystsmh High Income 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.