Correlation Between ALT Telecom and FN Factory

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

By analyzing existing cross correlation between ALT Telecom Public and FN Factory Outlet, you can compare the effects of market volatilities on ALT Telecom and FN Factory 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 ALT Telecom with a short position of FN Factory. Check out your portfolio center. Please also check ongoing floating volatility patterns of ALT Telecom and FN Factory.

Diversification Opportunities for ALT Telecom and FN Factory

0.86

Correlation Coefficient

ALT Telecom  FN Factory

Very poor diversification

The 3 months correlation between ALT and FN Factory is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding ALT Telecom Public and FN Factory Outlet in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FN Factory Outlet and ALT Telecom 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 ALT Telecom Public are associated (or correlated) with FN Factory. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FN Factory Outlet has no effect on the direction of ALT Telecom i.e., ALT Telecom and FN Factory go up and down completely randomly.

Pair Corralation between ALT Telecom and FN Factory

Assuming the 90 days trading horizon ALT Telecom Public is expected to generate 0.67 times more return on investment than FN Factory. However, ALT Telecom Public is 1.49 times less risky than FN Factory. It trades about -0.22 of its potential returns per unit of risk. FN Factory Outlet is currently generating about -0.4 per unit of risk. If you would invest  125.00  in ALT Telecom Public on October 11, 2024 and sell it today you would lose (22.00) from holding ALT Telecom Public or give up 17.6% of portfolio value over 90 days.

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

ALT Telecom Public  vs.  FN Factory Outlet

ALT Telecom Public

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ALT Telecom Public has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in February 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

FN Factory Outlet

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days FN Factory Outlet has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's fundamental drivers remain quite persistent which may send shares a bit higher in February 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with ALT Telecom and FN Factory

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

The idea behind ALT Telecom Public and FN Factory Outlet 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.