Correlation Between Fab Form and Atlas Engineered

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

By analyzing existing cross correlation between Fab Form Industries and Atlas Engineered Products, you can compare the effects of market volatilities on Fab Form and Atlas Engineered 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 Fab Form with a short position of Atlas Engineered. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fab Form and Atlas Engineered.

Diversification Opportunities for Fab Form and Atlas Engineered

0.43

Correlation Coefficient

Fab Form  Atlas Engineered

Very weak diversification

The 3 months correlation between Fab and Atlas is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Fab Form Industries and Atlas Engineered Products in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Atlas Engineered Products and Fab Form 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 Fab Form Industries are associated (or correlated) with Atlas Engineered. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Atlas Engineered Products has no effect on the direction of Fab Form i.e., Fab Form and Atlas Engineered go up and down completely randomly.

Pair Corralation between Fab Form and Atlas Engineered

Assuming the 90 days horizon Fab Form Industries is expected to under-perform the Atlas Engineered. In addition to that, Fab Form is 1.38 times more volatile than Atlas Engineered Products. It trades about -0.01 of its total potential returns per unit of risk. Atlas Engineered Products is currently generating about 0.06 per unit of volatility. If you would invest  117.00  in Atlas Engineered Products on September 4, 2024 and sell it today you would earn a total of  4.00  from holding Atlas Engineered Products or generate 3.42% return on investment over 90 days.

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

Fab Form Industries  vs.  Atlas Engineered Products

Fab Form Industries

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Fab Form Industries has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Fab Form is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Atlas Engineered Products

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Atlas Engineered Products has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Atlas Engineered is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Fab Form and Atlas Engineered

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

The idea behind Fab Form Industries and Atlas Engineered Products 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.