Correlation Between FC Investment and Public Service

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

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

Diversification Opportunities for FC Investment and Public Service

-0.11

Correlation Coefficient

FC Investment  Public Service

Good diversification

The 3 months correlation between FCIT and Public is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding FC Investment Trust and Public Service Enterprise in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Public Service Enterprise and FC Investment 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 FC Investment Trust are associated (or correlated) with Public Service. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Public Service Enterprise has no effect on the direction of FC Investment i.e., FC Investment and Public Service go up and down completely randomly.

Pair Corralation between FC Investment and Public Service

Assuming the 90 days trading horizon FC Investment is expected to generate 2.06 times less return on investment than Public Service. But when comparing it to its historical volatility, FC Investment Trust is 1.44 times less risky than Public Service. It trades about 0.05 of its potential returns per unit of risk. Public Service Enterprise is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  5,866  in Public Service Enterprise on October 5, 2024 and sell it today you would earn a total of  2,594  from holding Public Service Enterprise or generate 44.22% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	96.39%
Values	Daily Returns

FC Investment Trust  vs.  Public Service Enterprise

FC Investment Trust

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in FC Investment Trust are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, FC Investment may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Public Service Enterprise

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Public Service Enterprise has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Public Service is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with FC Investment and Public Service

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

The idea behind FC Investment Trust and Public Service Enterprise 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.