Correlation Between FocalTech Systems and WPG Holdings

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

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

Diversification Opportunities for FocalTech Systems and WPG Holdings

-0.25

Correlation Coefficient

FocalTech Systems  WPG Holdings

Very good diversification

The 3 months correlation between FocalTech and WPG is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding FocalTech Systems Co and WPG Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WPG Holdings and FocalTech Systems 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 FocalTech Systems Co are associated (or correlated) with WPG Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WPG Holdings has no effect on the direction of FocalTech Systems i.e., FocalTech Systems and WPG Holdings go up and down completely randomly.

Pair Corralation between FocalTech Systems and WPG Holdings

Assuming the 90 days trading horizon FocalTech Systems is expected to generate 1.68 times less return on investment than WPG Holdings. In addition to that, FocalTech Systems is 1.27 times more volatile than WPG Holdings. It trades about 0.02 of its total potential returns per unit of risk. WPG Holdings is currently generating about 0.05 per unit of volatility. If you would invest  4,825  in WPG Holdings on October 11, 2024 and sell it today you would earn a total of  2,245  from holding WPG Holdings or generate 46.53% return on investment over 90 days.

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

FocalTech Systems Co  vs.  WPG Holdings

FocalTech Systems

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days FocalTech Systems Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

WPG Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days WPG Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Pair Trading with FocalTech Systems and WPG Holdings

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

The idea behind FocalTech Systems Co and WPG Holdings 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.