Correlation Between Applied Finance and Select Fund
Can any of the company-specific risk be diversified away by investing in both Applied Finance and Select Fund 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 Applied Finance and Select Fund into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Applied Finance Explorer and Select Fund C, you can compare the effects of market volatilities on Applied Finance and Select Fund 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 Applied Finance with a short position of Select Fund. Check out your portfolio center. Please also check ongoing floating volatility patterns of Applied Finance and Select Fund.
Diversification Opportunities for Applied Finance and Select Fund
0.88 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Applied and Select is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Applied Finance Explorer and Select Fund C in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Select Fund C and Applied Finance 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 Applied Finance Explorer are associated (or correlated) with Select Fund. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Select Fund C has no effect on the direction of Applied Finance i.e., Applied Finance and Select Fund go up and down completely randomly.
Pair Corralation between Applied Finance and Select Fund
Assuming the 90 days horizon Applied Finance Explorer is expected to generate 1.35 times more return on investment than Select Fund. However, Applied Finance is 1.35 times more volatile than Select Fund C. It trades about 0.22 of its potential returns per unit of risk. Select Fund C is currently generating about 0.22 per unit of risk. If you would invest 2,082 in Applied Finance Explorer on May 31, 2025 and sell it today you would earn a total of 303.00 from holding Applied Finance Explorer or generate 14.55% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 98.41% |
| Values | Daily Returns |
Applied Finance Explorer vs. Select Fund C
Performance |
| Timeline |
| Applied Finance Explorer |
| Select Fund C |
Applied Finance and Select Fund Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Applied Finance and Select Fund
The main advantage of trading using opposite Applied Finance and Select Fund positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Applied Finance position performs unexpectedly, Select Fund 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 Select Fund will offset losses from the drop in Select Fund's long position.| Applied Finance vs. Applied Finance Core | Applied Finance vs. Applied Finance Core | Applied Finance vs. Applied Finance Explorer | Applied Finance vs. Applied Finance Select |
| Select Fund vs. Mesirow Financial High | Select Fund vs. Barings High Yield | Select Fund vs. Ab High Income | Select Fund vs. Virtus High Yield |
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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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