Correlation Between FC Investment and Baker Steel

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

Diversification Opportunities for FC Investment and Baker Steel

0.47

Correlation Coefficient

FC Investment  Baker Steel

Very weak diversification

The 3 months correlation between FCIT and Baker is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding FC Investment Trust and Baker Steel Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Baker Steel Resources 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 Baker Steel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Baker Steel Resources has no effect on the direction of FC Investment i.e., FC Investment and Baker Steel go up and down completely randomly.

Pair Corralation between FC Investment and Baker Steel

Assuming the 90 days trading horizon FC Investment Trust is expected to generate 0.56 times more return on investment than Baker Steel. However, FC Investment Trust is 1.79 times less risky than Baker Steel. It trades about -0.02 of its potential returns per unit of risk. Baker Steel Resources is currently generating about -0.02 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.  Baker Steel Resources

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.

Baker Steel Resources

Risk-Adjusted Performance

Very Weak

Over the last 90 days Baker Steel Resources has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Baker Steel 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 Baker Steel

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

The idea behind FC Investment Trust and Baker Steel Resources 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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.