Correlation Between Advanced Braking and FSA

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

By analyzing existing cross correlation between Advanced Braking Technology and FSA Group, you can compare the effects of market volatilities on Advanced Braking and FSA 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 Advanced Braking with a short position of FSA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Advanced Braking and FSA.

Diversification Opportunities for Advanced Braking and FSA

0.33

Correlation Coefficient

Advanced Braking  FSA

Weak diversification

The 3 months correlation between Advanced and FSA is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Advanced Braking Technology and FSA Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FSA Group and Advanced Braking 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 Advanced Braking Technology are associated (or correlated) with FSA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FSA Group has no effect on the direction of Advanced Braking i.e., Advanced Braking and FSA go up and down completely randomly.

Pair Corralation between Advanced Braking and FSA

Assuming the 90 days trading horizon Advanced Braking Technology is expected to under-perform the FSA. But the stock apears to be less risky and, when comparing its historical volatility, Advanced Braking Technology is 1.39 times less risky than FSA. The stock trades about -0.02 of its potential returns per unit of risk. The FSA Group is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest  81.00  in FSA Group on December 6, 2024 and sell it today you would earn a total of  9.00  from holding FSA Group or generate 11.11% return on investment over 90 days.

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

Advanced Braking Technology  vs.  FSA Group

Advanced Braking Tec

Risk-Adjusted Performance

Very Weak

Over the last 90 days Advanced Braking Technology has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Advanced Braking is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

FSA Group

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in FSA Group are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, FSA unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Advanced Braking and FSA

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

The idea behind Advanced Braking Technology and FSA Group 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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.