Correlation Between Foresight Environmental and Mitie Group

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

By analyzing existing cross correlation between Foresight Environmental Infrastructure and Mitie Group PLC, you can compare the effects of market volatilities on Foresight Environmental and Mitie Group 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 Foresight Environmental with a short position of Mitie Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Foresight Environmental and Mitie Group.

Diversification Opportunities for Foresight Environmental and Mitie Group

0.89

Correlation Coefficient

Foresight Environmental  Mitie Group

Very poor diversification

The 3 months correlation between Foresight and Mitie is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Foresight Environmental Infras and Mitie Group PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mitie Group PLC and Foresight Environmental 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 Foresight Environmental Infrastructure are associated (or correlated) with Mitie Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mitie Group PLC has no effect on the direction of Foresight Environmental i.e., Foresight Environmental and Mitie Group go up and down completely randomly.

Pair Corralation between Foresight Environmental and Mitie Group

Assuming the 90 days trading horizon Foresight Environmental Infrastructure is expected to under-perform the Mitie Group. But the stock apears to be less risky and, when comparing its historical volatility, Foresight Environmental Infrastructure is 1.11 times less risky than Mitie Group. The stock trades about -0.23 of its potential returns per unit of risk. The Mitie Group PLC is currently generating about -0.11 of returns per unit of risk over similar time horizon. If you would invest  11,440  in Mitie Group PLC on September 18, 2024 and sell it today you would lose (440.00) from holding Mitie Group PLC or give up 3.85% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	95.45%
Values	Daily Returns

Foresight Environmental Infras  vs.  Mitie Group PLC

Foresight Environmental

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Foresight Environmental Infrastructure has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Mitie Group PLC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Mitie Group 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 Foresight Environmental and Mitie Group

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

The idea behind Foresight Environmental Infrastructure and Mitie Group 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.