Correlation Between Fair Oaks and FC Investment

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

By analyzing existing cross correlation between Fair Oaks Income and FC Investment Trust, you can compare the effects of market volatilities on Fair Oaks and FC Investment 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 Fair Oaks with a short position of FC Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fair Oaks and FC Investment.

Diversification Opportunities for Fair Oaks and FC Investment

0.8

Correlation Coefficient

Fair Oaks  FC Investment

Very poor diversification

The 3 months correlation between Fair and FCIT is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Fair Oaks Income and FC Investment Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FC Investment Trust and Fair Oaks 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 Fair Oaks Income are associated (or correlated) with FC Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FC Investment Trust has no effect on the direction of Fair Oaks i.e., Fair Oaks and FC Investment go up and down completely randomly.

Pair Corralation between Fair Oaks and FC Investment

Assuming the 90 days trading horizon Fair Oaks Income is expected to generate 1.42 times more return on investment than FC Investment. However, Fair Oaks is 1.42 times more volatile than FC Investment Trust. It trades about 0.07 of its potential returns per unit of risk. FC Investment Trust is currently generating about 0.06 per unit of risk. If you would invest  38.00  in Fair Oaks Income on December 1, 2024 and sell it today you would earn a total of  18.00  from holding Fair Oaks Income or generate 47.37% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	99.6%
Values	Daily Returns

Fair Oaks Income  vs.  FC Investment Trust

Fair Oaks Income

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Fair Oaks Income are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Fair Oaks is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

FC Investment Trust

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in FC Investment Trust are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, FC Investment is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Fair Oaks and FC Investment

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

The idea behind Fair Oaks Income and FC Investment Trust 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..