Correlation Between FCS Software and Delta Manufacturing

Can any of the company-specific risk be diversified away by investing in both FCS Software and Delta Manufacturing 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 FCS Software and Delta Manufacturing into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between FCS Software Solutions and Delta Manufacturing Limited, you can compare the effects of market volatilities on FCS Software and Delta Manufacturing 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 FCS Software with a short position of Delta Manufacturing. Check out your portfolio center. Please also check ongoing floating volatility patterns of FCS Software and Delta Manufacturing.

Diversification Opportunities for FCS Software and Delta Manufacturing

0.19

Correlation Coefficient

FCS Software  Delta Manufacturing

Average diversification

The 3 months correlation between FCS and Delta is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding FCS Software Solutions and Delta Manufacturing Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Delta Manufacturing and FCS Software 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 FCS Software Solutions are associated (or correlated) with Delta Manufacturing. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Delta Manufacturing has no effect on the direction of FCS Software i.e., FCS Software and Delta Manufacturing go up and down completely randomly.

Pair Corralation between FCS Software and Delta Manufacturing

Assuming the 90 days trading horizon FCS Software Solutions is expected to under-perform the Delta Manufacturing. But the stock apears to be less risky and, when comparing its historical volatility, FCS Software Solutions is 1.26 times less risky than Delta Manufacturing. The stock trades about -0.03 of its potential returns per unit of risk. The Delta Manufacturing Limited is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  8,890  in Delta Manufacturing Limited on September 3, 2024 and sell it today you would earn a total of  2,447  from holding Delta Manufacturing Limited or generate 27.53% return on investment over 90 days.

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

FCS Software Solutions  vs.  Delta Manufacturing Limited

FCS Software Solutions

Risk-Adjusted Performance

0 of 100

Very Weak

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

Delta Manufacturing

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Delta Manufacturing Limited are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak technical and fundamental indicators, Delta Manufacturing sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with FCS Software and Delta Manufacturing

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

The idea behind FCS Software Solutions and Delta Manufacturing 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.