Correlation Between FIT Holding and Darfon Electronics

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

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

Diversification Opportunities for FIT Holding and Darfon Electronics

-0.21

Correlation Coefficient

FIT Holding  Darfon Electronics

Very good diversification

The 3 months correlation between FIT and Darfon is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding FIT Holding Co and Darfon Electronics Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Darfon Electronics Corp and FIT Holding 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 FIT Holding Co are associated (or correlated) with Darfon Electronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Darfon Electronics Corp has no effect on the direction of FIT Holding i.e., FIT Holding and Darfon Electronics go up and down completely randomly.

Pair Corralation between FIT Holding and Darfon Electronics

Assuming the 90 days trading horizon FIT Holding Co is expected to generate 1.48 times more return on investment than Darfon Electronics. However, FIT Holding is 1.48 times more volatile than Darfon Electronics Corp. It trades about 0.08 of its potential returns per unit of risk. Darfon Electronics Corp is currently generating about 0.02 per unit of risk. If you would invest  2,613  in FIT Holding Co on September 29, 2024 and sell it today you would earn a total of  3,577  from holding FIT Holding Co or generate 136.89% return on investment over 90 days.

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

FIT Holding Co  vs.  Darfon Electronics Corp

FIT Holding

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in FIT Holding Co are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, FIT Holding showed solid returns over the last few months and may actually be approaching a breakup point.

Darfon Electronics Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Darfon Electronics Corp 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 FIT Holding and Darfon Electronics

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

The idea behind FIT Holding Co and Darfon Electronics Corp 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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.