Correlation Between TXC Corp and FSP Technology

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

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

Diversification Opportunities for TXC Corp and FSP Technology

-0.28

Correlation Coefficient

TXC Corp  FSP Technology

Very good diversification

The 3 months correlation between TXC and FSP is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding TXC Corp and FSP Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FSP Technology and TXC Corp 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 TXC Corp are associated (or correlated) with FSP Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FSP Technology has no effect on the direction of TXC Corp i.e., TXC Corp and FSP Technology go up and down completely randomly.

Pair Corralation between TXC Corp and FSP Technology

Assuming the 90 days trading horizon TXC Corp is expected to generate 0.74 times more return on investment than FSP Technology. However, TXC Corp is 1.35 times less risky than FSP Technology. It trades about 0.03 of its potential returns per unit of risk. FSP Technology is currently generating about -0.1 per unit of risk. If you would invest  10,400  in TXC Corp on October 9, 2024 and sell it today you would earn a total of  50.00  from holding TXC Corp or generate 0.48% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.24%
Values	Daily Returns

TXC Corp  vs.  FSP Technology

TXC Corp

Risk-Adjusted Performance

0 of 100

Very Weak

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

FSP Technology

Risk-Adjusted Performance

2 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in FSP Technology are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, FSP Technology 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 TXC Corp and FSP Technology

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

The idea behind TXC Corp and FSP Technology 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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.