Correlation Between Fs Managed and Bright Rock

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

By analyzing existing cross correlation between Fs Managed Futures and Bright Rock Quality, you can compare the effects of market volatilities on Fs Managed and Bright Rock 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 Fs Managed with a short position of Bright Rock. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fs Managed and Bright Rock.

Diversification Opportunities for Fs Managed and Bright Rock

-0.36

Correlation Coefficient

Fs Managed  Bright Rock

Very good diversification

The 3 months correlation between FMFFX and Bright is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding Fs Managed Futures and Bright Rock Quality in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bright Rock Quality and Fs Managed 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 Fs Managed Futures are associated (or correlated) with Bright Rock. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bright Rock Quality has no effect on the direction of Fs Managed i.e., Fs Managed and Bright Rock go up and down completely randomly.

Pair Corralation between Fs Managed and Bright Rock

Assuming the 90 days horizon Fs Managed is expected to generate 1.24 times less return on investment than Bright Rock. But when comparing it to its historical volatility, Fs Managed Futures is 2.45 times less risky than Bright Rock. It trades about 0.25 of its potential returns per unit of risk. Bright Rock Quality is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  2,377  in Bright Rock Quality on September 2, 2024 and sell it today you would earn a total of  113.00  from holding Bright Rock Quality or generate 4.75% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	54.69%
Values	Daily Returns

Fs Managed Futures  vs.  Bright Rock Quality

Fs Managed Futures

Risk-Adjusted Performance

0 of 100

Solid

Over the last 90 days Fs Managed Futures has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong technical and fundamental indicators, Fs Managed is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Bright Rock Quality

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Bright Rock Quality are ranked lower than 10 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong fundamental indicators, Bright Rock is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Fs Managed and Bright Rock

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

The idea behind Fs Managed Futures and Bright Rock Quality 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.