Correlation Between Railway Signal and FSPG Hi

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

By analyzing existing cross correlation between Railway Signal Communication and FSPG Hi Tech Co, you can compare the effects of market volatilities on Railway Signal and FSPG Hi 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 Railway Signal with a short position of FSPG Hi. Check out your portfolio center. Please also check ongoing floating volatility patterns of Railway Signal and FSPG Hi.

Diversification Opportunities for Railway Signal and FSPG Hi

0.57

Correlation Coefficient

Railway Signal  FSPG Hi

Very weak diversification

The 3 months correlation between Railway and FSPG is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Railway Signal Communication and FSPG Hi Tech Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FSPG Hi Tech and Railway Signal 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 Railway Signal Communication are associated (or correlated) with FSPG Hi. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FSPG Hi Tech has no effect on the direction of Railway Signal i.e., Railway Signal and FSPG Hi go up and down completely randomly.

Pair Corralation between Railway Signal and FSPG Hi

Assuming the 90 days trading horizon Railway Signal Communication is expected to generate 0.8 times more return on investment than FSPG Hi. However, Railway Signal Communication is 1.24 times less risky than FSPG Hi. It trades about 0.08 of its potential returns per unit of risk. FSPG Hi Tech Co is currently generating about 0.06 per unit of risk. If you would invest  428.00  in Railway Signal Communication on September 20, 2024 and sell it today you would earn a total of  218.00  from holding Railway Signal Communication or generate 50.93% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	99.58%
Values	Daily Returns

Railway Signal Communication  vs.  FSPG Hi Tech Co

Railway Signal Commu

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Railway Signal Communication are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Railway Signal sustained solid returns over the last few months and may actually be approaching a breakup point.

FSPG Hi Tech

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in FSPG Hi Tech Co are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, FSPG Hi sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Railway Signal and FSPG Hi

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

The idea behind Railway Signal Communication and FSPG Hi Tech 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.

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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.