Correlation Between Financial and Energy Income
Can any of the company-specific risk be diversified away by investing in both Financial and Energy Income 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 and Energy Income into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Financial 15 Split and Energy Income, you can compare the effects of market volatilities on Financial and Energy Income 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 with a short position of Energy Income. Check out your portfolio center. Please also check ongoing floating volatility patterns of Financial and Energy Income.
Diversification Opportunities for Financial and Energy Income
0.43 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Financial and Energy is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Financial 15 Split and Energy Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Energy Income and Financial 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 15 Split are associated (or correlated) with Energy Income. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Energy Income has no effect on the direction of Financial i.e., Financial and Energy Income go up and down completely randomly.
Pair Corralation between Financial and Energy Income
Assuming the 90 days trading horizon Financial is expected to generate 1.1 times less return on investment than Energy Income. But when comparing it to its historical volatility, Financial 15 Split is 5.49 times less risky than Energy Income. It trades about 0.31 of its potential returns per unit of risk. Energy Income is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 172.00 in Energy Income on August 17, 2025 and sell it today you would earn a total of 23.00 from holding Energy Income or generate 13.37% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Financial 15 Split vs. Energy Income
Performance |
| Timeline |
| Financial 15 Split |
| Energy Income |
Financial and Energy Income Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Financial and Energy Income
The main advantage of trading using opposite Financial and Energy Income positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Financial position performs unexpectedly, Energy Income 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 Energy Income will offset losses from the drop in Energy Income's long position.| Financial vs. Dividend 15 Split | Financial vs. Canadian Banc Corp | Financial vs. North American Financial | Financial vs. Life Banc Split |
| Energy Income vs. Commerce Split Corp | Energy Income vs. Citadel Income | Energy Income vs. Healthcare Special Opportunities |
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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.
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