Correlation Between Fine Besteel and ICD

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

Diversification Opportunities for Fine Besteel and ICD

-0.39

Correlation Coefficient

Fine Besteel  ICD

Very good diversification

The 3 months correlation between Fine and ICD is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding Fine Besteel Co and ICD Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ICD Co 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 ICD. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ICD Co has no effect on the direction of Fine Besteel i.e., Fine Besteel and ICD go up and down completely randomly.

Pair Corralation between Fine Besteel and ICD

Assuming the 90 days trading horizon Fine Besteel Co is expected to generate 1.34 times more return on investment than ICD. However, Fine Besteel is 1.34 times more volatile than ICD Co. It trades about 0.09 of its potential returns per unit of risk. ICD Co is currently generating about -0.16 per unit of risk. If you would invest  87,700  in Fine Besteel Co on September 4, 2024 and sell it today you would earn a total of  13,500  from holding Fine Besteel Co or generate 15.39% return on investment over 90 days.

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

Fine Besteel Co  vs.  ICD Co

Fine Besteel

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Fine Besteel Co are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Fine Besteel sustained solid returns over the last few months and may actually be approaching a breakup point.

ICD Co

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ICD Co 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.

Pair Trading with Fine Besteel and ICD

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

The idea behind Fine Besteel Co and ICD 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.