Correlation Between Future Generation and Alderan Resources

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

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

Diversification Opportunities for Future Generation and Alderan Resources

-0.67

Correlation Coefficient

Future Generation  Alderan Resources

Excellent diversification

The 3 months correlation between Future and Alderan is -0.67. Overlapping area represents the amount of risk that can be diversified away by holding Future Generation Global and Alderan Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alderan Resources and Future Generation 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 Future Generation Global are associated (or correlated) with Alderan Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alderan Resources has no effect on the direction of Future Generation i.e., Future Generation and Alderan Resources go up and down completely randomly.

Pair Corralation between Future Generation and Alderan Resources

Assuming the 90 days trading horizon Future Generation Global is expected to generate 0.09 times more return on investment than Alderan Resources. However, Future Generation Global is 11.67 times less risky than Alderan Resources. It trades about 0.08 of its potential returns per unit of risk. Alderan Resources is currently generating about -0.01 per unit of risk. If you would invest  135.00  in Future Generation Global on October 22, 2024 and sell it today you would earn a total of  5.00  from holding Future Generation Global or generate 3.7% return on investment over 90 days.

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

Future Generation Global  vs.  Alderan Resources

Future Generation Global

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Future Generation Global are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable technical and fundamental indicators, Future Generation is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Alderan Resources

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Future Generation and Alderan Resources

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

The idea behind Future Generation Global and Alderan Resources 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.