Correlation Between Financial Industries and Rmb Mendon

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

Diversification Opportunities for Financial Industries and Rmb Mendon

0.88

Correlation Coefficient

Financial Industries  Rmb Mendon

Very poor diversification

The 3 months correlation between Financial and Rmb is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Financial Industries Fund and Rmb Mendon Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rmb Mendon Financial 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 Rmb Mendon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rmb Mendon Financial has no effect on the direction of Financial Industries i.e., Financial Industries and Rmb Mendon go up and down completely randomly.

Pair Corralation between Financial Industries and Rmb Mendon

Assuming the 90 days horizon Financial Industries Fund is expected to under-perform the Rmb Mendon. In addition to that, Financial Industries is 1.0 times more volatile than Rmb Mendon Financial. It trades about -0.12 of its total potential returns per unit of risk. Rmb Mendon Financial is currently generating about -0.11 per unit of volatility. If you would invest  4,924  in Rmb Mendon Financial on January 5, 2025 and sell it today you would lose (590.00) from holding Rmb Mendon Financial or give up 11.98% of portfolio value over 90 days.

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

Financial Industries Fund  vs.  Rmb Mendon Financial

Financial Industries

Risk-Adjusted Performance

Very Weak

Over the last 90 days Financial Industries Fund has generated negative risk-adjusted returns adding no value to fund investors. In spite of weak performance in the last few months, the Fund's basic indicators remain fairly strong which may send shares a bit higher in May 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Rmb Mendon Financial

Risk-Adjusted Performance

Very Weak

Over the last 90 days Rmb Mendon Financial has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's forward-looking signals remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Pair Trading with Financial Industries and Rmb Mendon

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

The idea behind Financial Industries Fund and Rmb Mendon Financial 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.