Correlation Between Financial Industries and Global Real

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

Diversification Opportunities for Financial Industries and Global Real

0.78

Correlation Coefficient

Financial Industries  Global Real

Poor diversification

The 3 months correlation between Financial and Global is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Financial Industries Fund and Global Real Estate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global Real Estate 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 Global Real. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Global Real Estate has no effect on the direction of Financial Industries i.e., Financial Industries and Global Real go up and down completely randomly.

Pair Corralation between Financial Industries and Global Real

Assuming the 90 days horizon Financial Industries Fund is expected to generate 1.17 times more return on investment than Global Real. However, Financial Industries is 1.17 times more volatile than Global Real Estate. It trades about 0.17 of its potential returns per unit of risk. Global Real Estate is currently generating about 0.05 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  163.00  from holding Financial Industries Fund or generate 9.32% return on investment over 90 days.

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

Financial Industries Fund  vs.  Global Real Estate

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 13 (%) 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.

Global Real Estate

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Global Real Estate are ranked lower than 3 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Global Real 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 Global Real

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

The idea behind Financial Industries Fund and Global Real Estate 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..