Correlation Between Railway Signal and FSPG Hi-Tech

Can any of the company-specific risk be diversified away by investing in both Railway Signal and FSPG Hi-Tech 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-Tech 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-Tech 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-Tech. Check out your portfolio center. Please also check ongoing floating volatility patterns of Railway Signal and FSPG Hi-Tech.

Diversification Opportunities for Railway Signal and FSPG Hi-Tech

0.54

Correlation Coefficient

Railway Signal  FSPG Hi-Tech

Very weak diversification

The 3 months correlation between Railway and FSPG is 0.54. 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-Tech. 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-Tech go up and down completely randomly.

Pair Corralation between Railway Signal and FSPG Hi-Tech

Assuming the 90 days trading horizon Railway Signal is expected to generate 10.54 times less return on investment than FSPG Hi-Tech. But when comparing it to its historical volatility, Railway Signal Communication is 2.69 times less risky than FSPG Hi-Tech. It trades about 0.06 of its potential returns per unit of risk. FSPG Hi Tech Co is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest  563.00  in FSPG Hi Tech Co on December 11, 2024 and sell it today you would earn a total of  146.00  from holding FSPG Hi Tech Co or generate 25.93% return on investment over 90 days.

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

Railway Signal Communication  vs.  FSPG Hi Tech Co

Railway Signal Commu

Risk-Adjusted Performance

Very Weak

Over the last 90 days Railway Signal Communication has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

FSPG Hi Tech

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in FSPG Hi Tech Co are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, FSPG Hi-Tech is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Railway Signal and FSPG Hi-Tech

The main advantage of trading using opposite Railway Signal and FSPG Hi-Tech positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Railway Signal position performs unexpectedly, FSPG Hi-Tech 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-Tech will offset losses from the drop in FSPG Hi-Tech'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 Equity Valuation module to check real value of public entities based on technical and fundamental data.