Correlation Between Financial Industries and Us Core

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

Diversification Opportunities for Financial Industries and Us Core

0.6

Correlation Coefficient

Financial Industries  Us Core

Poor diversification

The 3 months correlation between Financial and RSQAX is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Financial Industries Fund and Us E Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Us E Equity 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 Us Core. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Us E Equity has no effect on the direction of Financial Industries i.e., Financial Industries and Us Core go up and down completely randomly.

Pair Corralation between Financial Industries and Us Core

Assuming the 90 days horizon Financial Industries is expected to generate 11.28 times less return on investment than Us Core. In addition to that, Financial Industries is 1.32 times more volatile than Us E Equity. It trades about 0.01 of its total potential returns per unit of risk. Us E Equity is currently generating about 0.11 per unit of volatility. If you would invest  2,356  in Us E Equity on May 15, 2025 and sell it today you would earn a total of  98.00  from holding Us E Equity or generate 4.16% 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.  Us E Equity

Financial Industries

Risk-Adjusted Performance

Weakest

Over the last 90 days Financial Industries Fund has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Financial Industries is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Us E Equity

Risk-Adjusted Performance

Fair

Compared to the overall equity markets, risk-adjusted returns on investments in Us E Equity are ranked lower than 8 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Us Core 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 Us Core

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

The idea behind Financial Industries Fund and Us E Equity 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.

Check out your portfolio center.

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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.