Correlation Between Golden Friends and Fittech

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

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

Diversification Opportunities for Golden Friends and Fittech

-0.32

Correlation Coefficient

Golden Friends  Fittech

Very good diversification

The 3 months correlation between Golden and Fittech is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding Golden Friends and Fittech Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fittech and Golden Friends 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 Golden Friends are associated (or correlated) with Fittech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fittech has no effect on the direction of Golden Friends i.e., Golden Friends and Fittech go up and down completely randomly.

Pair Corralation between Golden Friends and Fittech

Assuming the 90 days trading horizon Golden Friends is expected to generate 0.17 times more return on investment than Fittech. However, Golden Friends is 6.05 times less risky than Fittech. It trades about -0.04 of its potential returns per unit of risk. Fittech Co is currently generating about -0.28 per unit of risk. If you would invest  10,250  in Golden Friends on October 8, 2024 and sell it today you would lose (50.00) from holding Golden Friends or give up 0.49% of portfolio value over 90 days.

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

Golden Friends  vs.  Fittech Co

Golden Friends

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Golden Friends are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Golden Friends is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Fittech

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Fittech Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in February 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Pair Trading with Golden Friends and Fittech

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

The idea behind Golden Friends and Fittech Co 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.

Check out your portfolio center.

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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.