Correlation Between Fernhill Corp and NamSys

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

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

Diversification Opportunities for Fernhill Corp and NamSys

-0.28

Correlation Coefficient

Fernhill Corp  NamSys

Very good diversification

The 3 months correlation between Fernhill and NamSys is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding Fernhill Corp and NamSys Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NamSys Inc 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 NamSys. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NamSys Inc has no effect on the direction of Fernhill Corp i.e., Fernhill Corp and NamSys go up and down completely randomly.

Pair Corralation between Fernhill Corp and NamSys

Given the investment horizon of 90 days Fernhill Corp is expected to generate 10.84 times more return on investment than NamSys. However, Fernhill Corp is 10.84 times more volatile than NamSys Inc. It trades about 0.22 of its potential returns per unit of risk. NamSys Inc is currently generating about 0.1 per unit of risk. If you would invest  0.06  in Fernhill Corp on October 8, 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 Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Fernhill Corp  vs.  NamSys Inc

Fernhill Corp

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Fernhill Corp are ranked lower than 5 (%) 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.

NamSys Inc

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in NamSys Inc are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, NamSys reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Fernhill Corp and NamSys

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

The idea behind Fernhill Corp and NamSys Inc 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.