Correlation Between Fitters Diversified and Amalgamated Industrial

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

By analyzing existing cross correlation between Fitters Diversified Bhd and Amalgamated Industrial Steel, you can compare the effects of market volatilities on Fitters Diversified and Amalgamated Industrial 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 Fitters Diversified with a short position of Amalgamated Industrial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fitters Diversified and Amalgamated Industrial.

Diversification Opportunities for Fitters Diversified and Amalgamated Industrial

0.43

Correlation Coefficient

Fitters Diversified  Amalgamated Industrial

Very weak diversification

The 3 months correlation between Fitters and Amalgamated is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Fitters Diversified Bhd and Amalgamated Industrial Steel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Amalgamated Industrial and Fitters Diversified 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 Fitters Diversified Bhd are associated (or correlated) with Amalgamated Industrial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Amalgamated Industrial has no effect on the direction of Fitters Diversified i.e., Fitters Diversified and Amalgamated Industrial go up and down completely randomly.

Pair Corralation between Fitters Diversified and Amalgamated Industrial

Assuming the 90 days trading horizon Fitters Diversified Bhd is expected to generate 1.64 times more return on investment than Amalgamated Industrial. However, Fitters Diversified is 1.64 times more volatile than Amalgamated Industrial Steel. It trades about 0.01 of its potential returns per unit of risk. Amalgamated Industrial Steel is currently generating about 0.01 per unit of risk. If you would invest  4.00  in Fitters Diversified Bhd on December 1, 2024 and sell it today you would lose (1.00) from holding Fitters Diversified Bhd or give up 25.0% of portfolio value over 90 days.

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

Fitters Diversified Bhd  vs.  Amalgamated Industrial Steel

Fitters Diversified Bhd

Risk-Adjusted Performance

Very Weak

Over the last 90 days Fitters Diversified Bhd has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, Fitters Diversified is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Amalgamated Industrial

Risk-Adjusted Performance

Very Weak

Over the last 90 days Amalgamated Industrial Steel has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, Amalgamated Industrial is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Fitters Diversified and Amalgamated Industrial

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

The idea behind Fitters Diversified Bhd and Amalgamated Industrial Steel 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.