Correlation Between Formetal and A Tech

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

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

Diversification Opportunities for Formetal and A Tech

0.49

Correlation Coefficient

Formetal  A Tech

Very weak diversification

The 3 months correlation between Formetal and 071670 is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Formetal Co and A Tech Solution Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on A Tech Solution and Formetal 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 Formetal Co are associated (or correlated) with A Tech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of A Tech Solution has no effect on the direction of Formetal i.e., Formetal and A Tech go up and down completely randomly.

Pair Corralation between Formetal and A Tech

Assuming the 90 days trading horizon Formetal is expected to generate 1.27 times less return on investment than A Tech. In addition to that, Formetal is 1.62 times more volatile than A Tech Solution Co. It trades about 0.06 of its total potential returns per unit of risk. A Tech Solution Co is currently generating about 0.13 per unit of volatility. If you would invest  549,000  in A Tech Solution Co on December 25, 2024 and sell it today you would earn a total of  100,000  from holding A Tech Solution Co or generate 18.21% return on investment over 90 days.

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

Formetal Co  vs.  A Tech Solution Co

Formetal

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Formetal Co are ranked lower than 4 (%) 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.

A Tech Solution

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in A Tech Solution Co are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, A Tech sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Formetal and A Tech

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

The idea behind Formetal Co and A Tech Solution 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.