Correlation Between Fortune Information and U Media

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

By analyzing existing cross correlation between Fortune Information Systems and U Media Communications, you can compare the effects of market volatilities on Fortune Information and U Media 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 Fortune Information with a short position of U Media. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fortune Information and U Media.

Diversification Opportunities for Fortune Information and U Media

0.42

Correlation Coefficient

Fortune Information  U Media

Very weak diversification

The 3 months correlation between Fortune and 6470 is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Fortune Information Systems and U Media Communications in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on U Media Communications and Fortune Information 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 Fortune Information Systems are associated (or correlated) with U Media. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of U Media Communications has no effect on the direction of Fortune Information i.e., Fortune Information and U Media go up and down completely randomly.

Pair Corralation between Fortune Information and U Media

Assuming the 90 days trading horizon Fortune Information Systems is expected to under-perform the U Media. In addition to that, Fortune Information is 1.29 times more volatile than U Media Communications. It trades about 0.0 of its total potential returns per unit of risk. U Media Communications is currently generating about 0.0 per unit of volatility. If you would invest  5,328  in U Media Communications on October 24, 2024 and sell it today you would lose (413.00) from holding U Media Communications or give up 7.75% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	99.8%
Values	Daily Returns

Fortune Information Systems  vs.  U Media Communications

Fortune Information

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Fortune Information Systems has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Fortune Information is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

U Media Communications

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days U Media Communications has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, U Media is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Fortune Information and U Media

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

The idea behind Fortune Information Systems and U Media Communications 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.