Correlation Between Consumer Portfolio and Finance Of

Can any of the company-specific risk be diversified away by investing in both Consumer Portfolio and Finance Of 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 Finance Of 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 Finance of America, you can compare the effects of market volatilities on Consumer Portfolio and Finance Of 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 Finance Of. Check out your portfolio center. Please also check ongoing floating volatility patterns of Consumer Portfolio and Finance Of.

Diversification Opportunities for Consumer Portfolio and Finance Of

0.75

Correlation Coefficient

Consumer Portfolio  Finance Of

Poor diversification

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

Pair Corralation between Consumer Portfolio and Finance Of

Given the investment horizon of 90 days Consumer Portfolio is expected to generate 8.43 times less return on investment than Finance Of. But when comparing it to its historical volatility, Consumer Portfolio Services is 4.23 times less risky than Finance Of. It trades about 0.11 of its potential returns per unit of risk. Finance of America is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest  1,285  in Finance of America on September 5, 2024 and sell it today you would earn a total of  702.00  from holding Finance of America or generate 54.63% return on investment over 90 days.

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

Consumer Portfolio Services  vs.  Finance of America

Consumer Portfolio

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Consumer Portfolio Services are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Consumer Portfolio unveiled solid returns over the last few months and may actually be approaching a breakup point.

Finance of America

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Finance of America are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite somewhat abnormal basic indicators, Finance Of sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Consumer Portfolio and Finance Of

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

The idea behind Consumer Portfolio Services and Finance of America 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 Transaction History module to view history of all your transactions and understand their impact on performance.