Correlation Between Dividend and Financial

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

By analyzing existing cross correlation between Dividend 15 Split and Financial 15 Split, you can compare the effects of market volatilities on Dividend and Financial 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 Dividend with a short position of Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dividend and Financial.

Diversification Opportunities for Dividend and Financial

0.94

Correlation Coefficient

Dividend  Financial

Almost no diversification

The 3 months correlation between Dividend and Financial is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Dividend 15 Split and Financial 15 Split in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Financial 15 Split and Dividend 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 Dividend 15 Split are associated (or correlated) with Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Financial 15 Split has no effect on the direction of Dividend i.e., Dividend and Financial go up and down completely randomly.

Pair Corralation between Dividend and Financial

Assuming the 90 days trading horizon Dividend is expected to generate 1.53 times less return on investment than Financial. But when comparing it to its historical volatility, Dividend 15 Split is 1.36 times less risky than Financial. It trades about 0.01 of its potential returns per unit of risk. Financial 15 Split is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  1,077  in Financial 15 Split on March 24, 2025 and sell it today you would earn a total of  6.00  from holding Financial 15 Split or generate 0.56% return on investment over 90 days.

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

Dividend 15 Split  vs.  Financial 15 Split

Dividend 15 Split

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Dividend 15 Split are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Dividend is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Financial 15 Split

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Financial 15 Split are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Financial is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Dividend and Financial

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

The idea behind Dividend 15 Split and Financial 15 Split 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.