Correlation Between FDO INV and FDO DE

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

By analyzing existing cross correlation between FDO INV CAD and FDO DE INVEST, you can compare the effects of market volatilities on FDO INV and FDO DE 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 FDO INV with a short position of FDO DE. Check out your portfolio center. Please also check ongoing floating volatility patterns of FDO INV and FDO DE.

Diversification Opportunities for FDO INV and FDO DE

0.88

Correlation Coefficient

FDO INV  FDO DE

Very poor diversification

The 3 months correlation between FDO and FDO is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding FDO INV CAD and FDO DE INVEST in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FDO DE INVEST and FDO INV 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 FDO INV CAD are associated (or correlated) with FDO DE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FDO DE INVEST has no effect on the direction of FDO INV i.e., FDO INV and FDO DE go up and down completely randomly.

Pair Corralation between FDO INV and FDO DE

Assuming the 90 days trading horizon FDO INV CAD is expected to under-perform the FDO DE. In addition to that, FDO INV is 4.42 times more volatile than FDO DE INVEST. It trades about -0.13 of its total potential returns per unit of risk. FDO DE INVEST is currently generating about -0.16 per unit of volatility. If you would invest  917.00  in FDO DE INVEST on September 1, 2024 and sell it today you would lose (60.00) from holding FDO DE INVEST or give up 6.54% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	87.5%
Values	Daily Returns

FDO INV CAD  vs.  FDO DE INVEST

FDO INV CAD

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days FDO INV CAD has generated negative risk-adjusted returns adding no value to fund investors. Despite weak performance in the last few months, the Fund's basic indicators remain somewhat strong which may send shares a bit higher in December 2024. The current disturbance may also be a sign of long term up-swing for the fund investors.

FDO DE INVEST

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days FDO DE INVEST has generated negative risk-adjusted returns adding no value to fund investors. Despite latest weak performance, the Fund's primary indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Pair Trading with FDO INV and FDO DE

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

The idea behind FDO INV CAD and FDO DE INVEST 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.