Correlation Between Ariel Appreciation and Firsthand Technology

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

By analyzing existing cross correlation between Ariel Appreciation Fund and Firsthand Technology Opportunities, you can compare the effects of market volatilities on Ariel Appreciation and Firsthand Technology 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 Ariel Appreciation with a short position of Firsthand Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ariel Appreciation and Firsthand Technology.

Diversification Opportunities for Ariel Appreciation and Firsthand Technology

0.15

Correlation Coefficient

Ariel Appreciation  Firsthand Technology

Average diversification

The 3 months correlation between Ariel and Firsthand is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding Ariel Appreciation Fund and Firsthand Technology Opportuni in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Firsthand Technology and Ariel Appreciation 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 Ariel Appreciation Fund are associated (or correlated) with Firsthand Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Firsthand Technology has no effect on the direction of Ariel Appreciation i.e., Ariel Appreciation and Firsthand Technology go up and down completely randomly.

Pair Corralation between Ariel Appreciation and Firsthand Technology

Assuming the 90 days horizon Ariel Appreciation Fund is expected to under-perform the Firsthand Technology. But the mutual fund apears to be less risky and, when comparing its historical volatility, Ariel Appreciation Fund is 1.34 times less risky than Firsthand Technology. The mutual fund trades about -0.16 of its potential returns per unit of risk. The Firsthand Technology Opportunities is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  406.00  in Firsthand Technology Opportunities on December 2, 2024 and sell it today you would lose (9.00) from holding Firsthand Technology Opportunities or give up 2.22% of portfolio value over 90 days.

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

Ariel Appreciation Fund  vs.  Firsthand Technology Opportuni

Ariel Appreciation

Risk-Adjusted Performance

Very Weak

Over the last 90 days Ariel Appreciation Fund has generated negative risk-adjusted returns adding no value to fund investors. In spite of weak performance in the last few months, the Fund's forward indicators remain fairly 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 fund investors.

Firsthand Technology

Risk-Adjusted Performance

Very Weak

Over the last 90 days Firsthand Technology Opportunities has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Firsthand Technology is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Ariel Appreciation and Firsthand Technology

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

The idea behind Ariel Appreciation Fund and Firsthand Technology Opportunities 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 Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.