Correlation Between Fortress Income and Investec

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

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

Diversification Opportunities for Fortress Income and Investec

-0.59

Correlation Coefficient

Fortress Income  Investec

Excellent diversification

The 3 months correlation between Fortress and Investec is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding Fortress Income and Investec in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Investec and Fortress Income 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 Fortress Income are associated (or correlated) with Investec. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Investec has no effect on the direction of Fortress Income i.e., Fortress Income and Investec go up and down completely randomly.

Pair Corralation between Fortress Income and Investec

Assuming the 90 days trading horizon Fortress Income is expected to generate 0.56 times more return on investment than Investec. However, Fortress Income is 1.79 times less risky than Investec. It trades about 0.4 of its potential returns per unit of risk. Investec is currently generating about -0.17 per unit of risk. If you would invest  186,800  in Fortress Income on September 20, 2024 and sell it today you would earn a total of  14,500  from holding Fortress Income or generate 7.76% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	95.45%
Values	Daily Returns

Fortress Income  vs.  Investec

Fortress Income

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Fortress Income has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Fortress Income is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Investec

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Investec has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Investec is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Fortress Income and Investec

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

The idea behind Fortress Income and Investec 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.