Correlation Between FC Investment and BH Macro

Can any of the company-specific risk be diversified away by investing in both FC Investment and BH Macro 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 BH Macro 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 BH Macro Limited, you can compare the effects of market volatilities on FC Investment and BH Macro 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 BH Macro. Check out your portfolio center. Please also check ongoing floating volatility patterns of FC Investment and BH Macro.

Diversification Opportunities for FC Investment and BH Macro

0.43

Correlation Coefficient

FC Investment  BH Macro

Very weak diversification

The 3 months correlation between FCIT and BHMU is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding FC Investment Trust and BH Macro Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BH Macro Limited 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 BH Macro. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BH Macro Limited has no effect on the direction of FC Investment i.e., FC Investment and BH Macro go up and down completely randomly.

Pair Corralation between FC Investment and BH Macro

Assuming the 90 days trading horizon FC Investment Trust is expected to generate 0.97 times more return on investment than BH Macro. However, FC Investment Trust is 1.03 times less risky than BH Macro. It trades about -0.02 of its potential returns per unit of risk. BH Macro Limited is currently generating about -0.14 per unit of risk. If you would invest  110,839  in FC Investment Trust on December 30, 2024 and sell it today you would lose (1,839) from holding FC Investment Trust or give up 1.66% of portfolio value over 90 days.

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

FC Investment Trust  vs.  BH Macro Limited

FC Investment Trust

Risk-Adjusted Performance

Very Weak

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

BH Macro Limited

Risk-Adjusted Performance

Very Weak

Over the last 90 days BH Macro Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with FC Investment and BH Macro

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

The idea behind FC Investment Trust and BH Macro Limited 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.