Correlation Between Design and Furonteer

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

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

Diversification Opportunities for Design and Furonteer

-0.57

Correlation Coefficient

Design  Furonteer

Excellent diversification

The 3 months correlation between Design and Furonteer is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding Design Co and Furonteer in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Furonteer and Design 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 Design Co are associated (or correlated) with Furonteer. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Furonteer has no effect on the direction of Design i.e., Design and Furonteer go up and down completely randomly.

Pair Corralation between Design and Furonteer

Assuming the 90 days trading horizon Design Co is expected to under-perform the Furonteer. In addition to that, Design is 1.31 times more volatile than Furonteer. It trades about -0.1 of its total potential returns per unit of risk. Furonteer is currently generating about 0.07 per unit of volatility. If you would invest  2,270,000  in Furonteer on September 27, 2024 and sell it today you would earn a total of  345,000  from holding Furonteer or generate 15.2% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.36%
Values	Daily Returns

Design Co  vs.  Furonteer

Design

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Design 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.

Furonteer

Risk-Adjusted Performance

5 of 100

Modest

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

Pair Trading with Design and Furonteer

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

The idea behind Design Co and Furonteer 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.