Correlation Between FC Investment and Global Opportunities

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

Diversification Opportunities for FC Investment and Global Opportunities

0.08

Correlation Coefficient

FC Investment  Global Opportunities

Significant diversification

The 3 months correlation between FCIT and Global is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding FC Investment Trust and Global Opportunities Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global Opportunities 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 Global Opportunities. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Global Opportunities has no effect on the direction of FC Investment i.e., FC Investment and Global Opportunities go up and down completely randomly.

Pair Corralation between FC Investment and Global Opportunities

Assuming the 90 days trading horizon FC Investment Trust is expected to under-perform the Global Opportunities. But the stock apears to be less risky and, when comparing its historical volatility, FC Investment Trust is 1.19 times less risky than Global Opportunities. The stock trades about -0.02 of its potential returns per unit of risk. The Global Opportunities Trust is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  28,200  in Global Opportunities Trust on December 24, 2024 and sell it today you would earn a total of  1,000.00  from holding Global Opportunities Trust or generate 3.55% return on investment over 90 days.

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

FC Investment Trust  vs.  Global Opportunities Trust

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 newest stock price uproar, may contribute to short-horizon losses for the private investors.

Global Opportunities

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Global Opportunities Trust are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, Global Opportunities is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with FC Investment and Global Opportunities

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

The idea behind FC Investment Trust and Global Opportunities Trust 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.