Correlation Between Financial Industries and Rational Special

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

Diversification Opportunities for Financial Industries and Rational Special

0.44

Correlation Coefficient

Financial Industries  Rational Special

Very weak diversification

The 3 months correlation between Financial and Rational is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Financial Industries Fund and Rational Special Situations in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rational Special Sit 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 Rational Special. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rational Special Sit has no effect on the direction of Financial Industries i.e., Financial Industries and Rational Special go up and down completely randomly.

Pair Corralation between Financial Industries and Rational Special

Assuming the 90 days horizon Financial Industries Fund is expected to generate 11.21 times more return on investment than Rational Special. However, Financial Industries is 11.21 times more volatile than Rational Special Situations. It trades about 0.19 of its potential returns per unit of risk. Rational Special Situations is currently generating about 0.19 per unit of risk. If you would invest  1,749  in Financial Industries Fund on May 1, 2025 and sell it today you would earn a total of  178.00  from holding Financial Industries Fund or generate 10.18% return on investment over 90 days.

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

Financial Industries Fund  vs.  Rational Special Situations

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 14 (%) 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.

Rational Special Sit

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Rational Special Situations are ranked lower than 14 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, Rational Special is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Financial Industries and Rational Special

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

The idea behind Financial Industries Fund and Rational Special Situations 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.