Correlation Between FC Investment and LBG Media

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

Diversification Opportunities for FC Investment and LBG Media

-0.76

Correlation Coefficient

FC Investment  LBG Media

Pay attention - limited upside

The 3 months correlation between FCIT and LBG is -0.76. Overlapping area represents the amount of risk that can be diversified away by holding FC Investment Trust and LBG Media PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LBG Media PLC 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 LBG Media. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LBG Media PLC has no effect on the direction of FC Investment i.e., FC Investment and LBG Media go up and down completely randomly.

Pair Corralation between FC Investment and LBG Media

Assuming the 90 days trading horizon FC Investment is expected to generate 4.35 times less return on investment than LBG Media. But when comparing it to its historical volatility, FC Investment Trust is 3.21 times less risky than LBG Media. It trades about 0.11 of its potential returns per unit of risk. LBG Media PLC is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  6,600  in LBG Media PLC on September 8, 2024 and sell it today you would earn a total of  5,400  from holding LBG Media PLC or generate 81.82% return on investment over 90 days.

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

FC Investment Trust  vs.  LBG Media PLC

FC Investment Trust

Risk-Adjusted Performance

23 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in FC Investment Trust are ranked lower than 23 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, FC Investment unveiled solid returns over the last few months and may actually be approaching a breakup point.

LBG Media PLC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days LBG Media PLC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with FC Investment and LBG Media

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

The idea behind FC Investment Trust and LBG Media PLC 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.