Correlation Between FLJ Old and Southcorp Capital

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

By analyzing existing cross correlation between FLJ Old and Southcorp Capital, you can compare the effects of market volatilities on FLJ Old and Southcorp Capital 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 Southcorp Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of FLJ Old and Southcorp Capital.

Diversification Opportunities for FLJ Old and Southcorp Capital

-0.48

Correlation Coefficient

FLJ Old  Southcorp Capital

Very good diversification

The 3 months correlation between FLJ and Southcorp is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding FLJ Old and Southcorp Capital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Southcorp Capital 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 Southcorp Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Southcorp Capital has no effect on the direction of FLJ Old i.e., FLJ Old and Southcorp Capital go up and down completely randomly.

Pair Corralation between FLJ Old and Southcorp Capital

If you would invest  0.04  in Southcorp Capital on October 11, 2024 and sell it today you would lose (0.02) from holding Southcorp Capital or give up 50.0% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	2.38%
Values	Daily Returns

FLJ Old  vs.  Southcorp Capital

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.

Southcorp Capital

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Southcorp Capital are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating technical indicators, Southcorp Capital exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with FLJ Old and Southcorp Capital

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

The idea behind FLJ Old and Southcorp Capital 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.