Correlation Between Crosswood and FIPP SA

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

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

Diversification Opportunities for Crosswood and FIPP SA

-0.73

Correlation Coefficient

Crosswood  FIPP SA

Pay attention - limited upside

The 3 months correlation between Crosswood and FIPP is -0.73. Overlapping area represents the amount of risk that can be diversified away by holding Crosswood and FIPP SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FIPP SA and Crosswood 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 Crosswood are associated (or correlated) with FIPP SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FIPP SA has no effect on the direction of Crosswood i.e., Crosswood and FIPP SA go up and down completely randomly.

Pair Corralation between Crosswood and FIPP SA

Assuming the 90 days trading horizon Crosswood is expected to generate 0.47 times more return on investment than FIPP SA. However, Crosswood is 2.14 times less risky than FIPP SA. It trades about 0.12 of its potential returns per unit of risk. FIPP SA is currently generating about -0.01 per unit of risk. If you would invest  885.00  in Crosswood on October 26, 2024 and sell it today you would earn a total of  195.00  from holding Crosswood or generate 22.03% return on investment over 90 days.

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

Crosswood  vs.  FIPP SA

Crosswood

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Crosswood are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Crosswood sustained solid returns over the last few months and may actually be approaching a breakup point.

FIPP SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days FIPP SA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, FIPP SA is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Crosswood and FIPP SA

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

The idea behind Crosswood and FIPP SA 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.