Correlation Between Financial Industries and Tax Free

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

Diversification Opportunities for Financial Industries and Tax Free

0.19

Correlation Coefficient

Financial Industries  Tax Free

Average diversification

The 3 months correlation between Financial and Tax is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding Financial Industries Fund and Tax Free Conservative Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tax Free Conservative 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 Tax Free. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tax Free Conservative has no effect on the direction of Financial Industries i.e., Financial Industries and Tax Free go up and down completely randomly.

Pair Corralation between Financial Industries and Tax Free

Assuming the 90 days horizon Financial Industries Fund is expected to under-perform the Tax Free. In addition to that, Financial Industries is 20.77 times more volatile than Tax Free Conservative Income. It trades about -0.01 of its total potential returns per unit of risk. Tax Free Conservative Income is currently generating about 0.21 per unit of volatility. If you would invest  995.00  in Tax Free Conservative Income on July 10, 2025 and sell it today you would earn a total of  5.00  from holding Tax Free Conservative Income or generate 0.5% return on investment over 90 days.

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

Financial Industries Fund  vs.  Tax Free Conservative Income

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.

Tax Free Conservative

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Tax Free Conservative Income are ranked lower than 16 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Tax Free 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 Tax Free

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

The idea behind Financial Industries Fund and Tax Free Conservative 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.