Correlation Between FLJ Old and New Concept

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

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

Diversification Opportunities for FLJ Old and New Concept

-0.45

Correlation Coefficient

FLJ Old  New Concept

Very good diversification

The 3 months correlation between FLJ and New is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding FLJ Old and New Concept Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on New Concept Energy and FLJ Old 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 FLJ Old are associated (or correlated) with New Concept. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of New Concept Energy has no effect on the direction of FLJ Old i.e., FLJ Old and New Concept go up and down completely randomly.

Pair Corralation between FLJ Old and New Concept

Considering the 90-day investment horizon FLJ Old is expected to under-perform the New Concept. In addition to that, FLJ Old is 3.99 times more volatile than New Concept Energy. It trades about -0.01 of its total potential returns per unit of risk. New Concept Energy is currently generating about 0.02 per unit of volatility. If you would invest  114.00  in New Concept Energy on October 11, 2024 and sell it today you would earn a total of  11.00  from holding New Concept Energy or generate 9.65% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	78.02%
Values	Daily Returns

FLJ Old  vs.  New Concept Energy

FLJ Old

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days FLJ Old has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively steady essential indicators, FLJ Old is not utilizing all of its potentials. The latest stock price chaos, may contribute to medium-term losses for the stakeholders.

New Concept Energy

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in New Concept Energy are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable fundamental drivers, New Concept is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with FLJ Old and New Concept

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

The idea behind FLJ Old and New Concept Energy 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.