Correlation Between Fine Besteel and Anam Electronics

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

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

Diversification Opportunities for Fine Besteel and Anam Electronics

0.69

Correlation Coefficient

Fine Besteel  Anam Electronics

Poor diversification

The 3 months correlation between Fine and Anam is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Fine Besteel Co and Anam Electronics Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Anam Electronics and Fine Besteel 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 Fine Besteel Co are associated (or correlated) with Anam Electronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Anam Electronics has no effect on the direction of Fine Besteel i.e., Fine Besteel and Anam Electronics go up and down completely randomly.

Pair Corralation between Fine Besteel and Anam Electronics

Assuming the 90 days trading horizon Fine Besteel Co is expected to under-perform the Anam Electronics. But the stock apears to be less risky and, when comparing its historical volatility, Fine Besteel Co is 1.42 times less risky than Anam Electronics. The stock trades about -0.02 of its potential returns per unit of risk. The Anam Electronics Co is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  131,900  in Anam Electronics Co on December 28, 2024 and sell it today you would earn a total of  17,300  from holding Anam Electronics Co or generate 13.12% return on investment over 90 days.

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

Fine Besteel Co  vs.  Anam Electronics Co

Fine Besteel

Risk-Adjusted Performance

Very Weak

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

Anam Electronics

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Anam Electronics Co are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Anam Electronics sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Fine Besteel and Anam Electronics

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

The idea behind Fine Besteel Co and Anam Electronics 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.