Correlation Between Consumer Portfolio and Foreign Trade

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

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

Diversification Opportunities for Consumer Portfolio and Foreign Trade

0.75

Correlation Coefficient

Consumer Portfolio  Foreign Trade

Poor diversification

The 3 months correlation between Consumer and Foreign is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Consumer Portfolio Services and Foreign Trade Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Foreign Trade Bank and Consumer Portfolio 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 Consumer Portfolio Services are associated (or correlated) with Foreign Trade. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Foreign Trade Bank has no effect on the direction of Consumer Portfolio i.e., Consumer Portfolio and Foreign Trade go up and down completely randomly.

Pair Corralation between Consumer Portfolio and Foreign Trade

Given the investment horizon of 90 days Consumer Portfolio is expected to generate 1.28 times less return on investment than Foreign Trade. In addition to that, Consumer Portfolio is 1.41 times more volatile than Foreign Trade Bank. It trades about 0.07 of its total potential returns per unit of risk. Foreign Trade Bank is currently generating about 0.13 per unit of volatility. If you would invest  3,209  in Foreign Trade Bank on September 22, 2024 and sell it today you would earn a total of  397.00  from holding Foreign Trade Bank or generate 12.37% return on investment over 90 days.

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

Consumer Portfolio Services  vs.  Foreign Trade Bank

Consumer Portfolio

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Consumer Portfolio Services are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Consumer Portfolio may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Foreign Trade Bank

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Foreign Trade Bank are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain essential indicators, Foreign Trade may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Consumer Portfolio and Foreign Trade

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

The idea behind Consumer Portfolio Services and Foreign Trade Bank 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.