Correlation Between FnGuide and Company K

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

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

Diversification Opportunities for FnGuide and Company K

0.28

Correlation Coefficient

FnGuide  Company K

Modest diversification

The 3 months correlation between FnGuide and Company is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding FnGuide and Company K Partners in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Company K Partners and FnGuide 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 FnGuide are associated (or correlated) with Company K. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Company K Partners has no effect on the direction of FnGuide i.e., FnGuide and Company K go up and down completely randomly.

Pair Corralation between FnGuide and Company K

Assuming the 90 days trading horizon FnGuide is expected to generate 1.86 times more return on investment than Company K. However, FnGuide is 1.86 times more volatile than Company K Partners. It trades about 0.05 of its potential returns per unit of risk. Company K Partners is currently generating about -0.03 per unit of risk. If you would invest  726,000  in FnGuide on September 22, 2024 and sell it today you would earn a total of  88,000  from holding FnGuide or generate 12.12% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	99.19%
Values	Daily Returns

FnGuide  vs.  Company K Partners

FnGuide

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days FnGuide has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Company K Partners

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Company K Partners has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Company K is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with FnGuide and Company K

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

The idea behind FnGuide and Company K Partners 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.