Correlation Between Firm Capital and Guru Organic

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

By analyzing existing cross correlation between Firm Capital Mortgage and Guru Organic Energy, you can compare the effects of market volatilities on Firm Capital and Guru Organic 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 Firm Capital with a short position of Guru Organic. Check out your portfolio center. Please also check ongoing floating volatility patterns of Firm Capital and Guru Organic.

Diversification Opportunities for Firm Capital and Guru Organic

-0.4

Correlation Coefficient

Firm Capital  Guru Organic

Very good diversification

The 3 months correlation between Firm and Guru is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding Firm Capital Mortgage and Guru Organic Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Guru Organic Energy and Firm Capital 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 Firm Capital Mortgage are associated (or correlated) with Guru Organic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Guru Organic Energy has no effect on the direction of Firm Capital i.e., Firm Capital and Guru Organic go up and down completely randomly.

Pair Corralation between Firm Capital and Guru Organic

Assuming the 90 days horizon Firm Capital Mortgage is expected to generate 0.27 times more return on investment than Guru Organic. However, Firm Capital Mortgage is 3.76 times less risky than Guru Organic. It trades about 0.11 of its potential returns per unit of risk. Guru Organic Energy is currently generating about -0.31 per unit of risk. If you would invest  1,179  in Firm Capital Mortgage on September 29, 2024 and sell it today you would earn a total of  30.00  from holding Firm Capital Mortgage or generate 2.54% return on investment over 90 days.

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

Firm Capital Mortgage  vs.  Guru Organic Energy

Firm Capital Mortgage

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Firm Capital Mortgage are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Firm Capital is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Guru Organic Energy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Guru Organic Energy has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Firm Capital and Guru Organic

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

The idea behind Firm Capital Mortgage and Guru Organic Energy 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.

Check out your portfolio center.

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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.