Correlation Between Financial Services and Financial Services

Can any of the company-specific risk be diversified away by investing in both Financial Services and Financial Services 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 Services and Financial Services into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Financial Services Portfolio and Financial Services Portfolio, you can compare the effects of market volatilities on Financial Services and Financial Services 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 Services with a short position of Financial Services. Check out your portfolio center. Please also check ongoing floating volatility patterns of Financial Services and Financial Services.

Diversification Opportunities for Financial Services and Financial Services

0.91

Correlation Coefficient

Financial Services  Financial Services

Almost no diversification

The 3 months correlation between Financial and FINANCIAL is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Financial Services Portfolio and Financial Services Portfolio in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Financial Services and Financial Services 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 Services Portfolio are associated (or correlated) with Financial Services. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Financial Services has no effect on the direction of Financial Services i.e., Financial Services and Financial Services go up and down completely randomly.

Pair Corralation between Financial Services and Financial Services

Assuming the 90 days horizon Financial Services Portfolio is expected to generate 1.0 times more return on investment than Financial Services. However, Financial Services is 1.0 times more volatile than Financial Services Portfolio. It trades about 0.43 of its potential returns per unit of risk. Financial Services Portfolio is currently generating about 0.43 per unit of risk. If you would invest  961.00  in Financial Services Portfolio on February 16, 2025 and sell it today you would earn a total of  109.00  from holding Financial Services Portfolio or generate 11.34% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	95.45%
Values	Daily Returns

Financial Services Portfolio  vs.  Financial Services Portfolio

Financial Services

Risk-Adjusted Performance

Very Weak

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

Financial Services

Risk-Adjusted Performance

Very Weak

Over the last 90 days Financial Services Portfolio has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong forward indicators, Financial Services 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 Services and Financial Services

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

The idea behind Financial Services Portfolio and Financial Services Portfolio 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 Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.