Correlation Between Fernhill Corp and Fastbase

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

By analyzing existing cross correlation between Fernhill Corp and Fastbase, you can compare the effects of market volatilities on Fernhill Corp and Fastbase 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 Fernhill Corp with a short position of Fastbase. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fernhill Corp and Fastbase.

Diversification Opportunities for Fernhill Corp and Fastbase

0.21

Correlation Coefficient

Fernhill Corp  Fastbase

Modest diversification

The 3 months correlation between Fernhill and Fastbase is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Fernhill Corp and Fastbase in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fastbase and Fernhill Corp 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 Fernhill Corp are associated (or correlated) with Fastbase. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fastbase has no effect on the direction of Fernhill Corp i.e., Fernhill Corp and Fastbase go up and down completely randomly.

Pair Corralation between Fernhill Corp and Fastbase

Given the investment horizon of 90 days Fernhill Corp is expected to generate 0.98 times more return on investment than Fastbase. However, Fernhill Corp is 1.02 times less risky than Fastbase. It trades about 0.21 of its potential returns per unit of risk. Fastbase is currently generating about 0.02 per unit of risk. If you would invest  0.06  in Fernhill Corp on October 11, 2024 and sell it today you would earn a total of  0.03  from holding Fernhill Corp or generate 50.0% return on investment over 90 days.

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

Fernhill Corp  vs.  Fastbase

Fernhill Corp

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Fernhill Corp are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Fernhill Corp displayed solid returns over the last few months and may actually be approaching a breakup point.

Fastbase

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Fastbase are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile basic indicators, Fastbase exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Fernhill Corp and Fastbase

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

The idea behind Fernhill Corp and Fastbase 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 CEOs Directory module to screen CEOs from public companies around the world.