Correlation Between FBD Holdings and Ovoca Gold

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

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

Diversification Opportunities for FBD Holdings and Ovoca Gold

-0.51

Correlation Coefficient

FBD Holdings  Ovoca Gold

Excellent diversification

The 3 months correlation between FBD and Ovoca is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding FBD Holdings PLC and Ovoca Gold PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ovoca Gold PLC and FBD Holdings 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 FBD Holdings PLC are associated (or correlated) with Ovoca Gold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ovoca Gold PLC has no effect on the direction of FBD Holdings i.e., FBD Holdings and Ovoca Gold go up and down completely randomly.

Pair Corralation between FBD Holdings and Ovoca Gold

Assuming the 90 days trading horizon FBD Holdings is expected to generate 14.13 times less return on investment than Ovoca Gold. But when comparing it to its historical volatility, FBD Holdings PLC is 9.26 times less risky than Ovoca Gold. It trades about 0.03 of its potential returns per unit of risk. Ovoca Gold PLC is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  7.00  in Ovoca Gold PLC on October 11, 2024 and sell it today you would lose (4.85) from holding Ovoca Gold PLC or give up 69.29% of portfolio value over 90 days.

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

FBD Holdings PLC  vs.  Ovoca Gold PLC

FBD Holdings PLC

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in FBD Holdings PLC are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, FBD Holdings is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Ovoca Gold PLC

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Ovoca Gold PLC are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Ovoca Gold reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with FBD Holdings and Ovoca Gold

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

The idea behind FBD Holdings PLC and Ovoca Gold PLC 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.