Correlation Between Fine Besteel and Dragonfly

Can any of the company-specific risk be diversified away by investing in both Fine Besteel and Dragonfly 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 Dragonfly 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 Dragonfly GF Co, you can compare the effects of market volatilities on Fine Besteel and Dragonfly 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 Dragonfly. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fine Besteel and Dragonfly.

Diversification Opportunities for Fine Besteel and Dragonfly

-0.4

Correlation Coefficient

Fine Besteel  Dragonfly

Very good diversification

The 3 months correlation between Fine and Dragonfly is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding Fine Besteel Co and Dragonfly GF Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dragonfly GF 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 Dragonfly. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dragonfly GF has no effect on the direction of Fine Besteel i.e., Fine Besteel and Dragonfly go up and down completely randomly.

Pair Corralation between Fine Besteel and Dragonfly

Assuming the 90 days trading horizon Fine Besteel Co is expected to generate 0.64 times more return on investment than Dragonfly. However, Fine Besteel Co is 1.57 times less risky than Dragonfly. It trades about -0.04 of its potential returns per unit of risk. Dragonfly GF Co is currently generating about -0.03 per unit of risk. If you would invest  205,000  in Fine Besteel Co on October 8, 2024 and sell it today you would lose (112,900) from holding Fine Besteel Co or give up 55.07% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	96.88%
Values	Daily Returns

Fine Besteel Co  vs.  Dragonfly GF Co

Fine Besteel

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Fine Besteel Co are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. 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.

Dragonfly GF

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Dragonfly GF Co are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Dragonfly sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Fine Besteel and Dragonfly

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

The idea behind Fine Besteel Co and Dragonfly GF 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.