Correlation Between A Tech and Formetal

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

By analyzing existing cross correlation between A Tech Solution Co and Formetal Co, you can compare the effects of market volatilities on A Tech and Formetal 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 A Tech with a short position of Formetal. Check out your portfolio center. Please also check ongoing floating volatility patterns of A Tech and Formetal.

Diversification Opportunities for A Tech and Formetal

-0.18

Correlation Coefficient

A Tech  Formetal

Good diversification

The 3 months correlation between 071670 and Formetal is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding A Tech Solution Co and Formetal Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Formetal and A Tech 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 A Tech Solution Co are associated (or correlated) with Formetal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Formetal has no effect on the direction of A Tech i.e., A Tech and Formetal go up and down completely randomly.

Pair Corralation between A Tech and Formetal

Assuming the 90 days trading horizon A Tech Solution Co is expected to under-perform the Formetal. In addition to that, A Tech is 1.0 times more volatile than Formetal Co. It trades about -0.09 of its total potential returns per unit of risk. Formetal Co is currently generating about 0.01 per unit of volatility. If you would invest  359,219  in Formetal Co on October 7, 2024 and sell it today you would lose (3,719) from holding Formetal Co or give up 1.04% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

A Tech Solution Co  vs.  Formetal Co

A Tech Solution

Risk-Adjusted Performance

0 of 100

Very Weak

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

Formetal

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Formetal Co are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Formetal sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with A Tech and Formetal

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

The idea behind A Tech Solution Co and Formetal Co 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.