Correlation Between FN Factory and Interlink Communication

Can any of the company-specific risk be diversified away by investing in both FN Factory and Interlink Communication 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 FN Factory and Interlink Communication into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between FN Factory Outlet and Interlink Communication Public, you can compare the effects of market volatilities on FN Factory and Interlink Communication 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 FN Factory with a short position of Interlink Communication. Check out your portfolio center. Please also check ongoing floating volatility patterns of FN Factory and Interlink Communication.

Diversification Opportunities for FN Factory and Interlink Communication

0.57

Correlation Coefficient

FN Factory  Interlink Communication

Very weak diversification

The 3 months correlation between FN Factory and Interlink is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding FN Factory Outlet and Interlink Communication Public in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Interlink Communication and FN Factory 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 FN Factory Outlet are associated (or correlated) with Interlink Communication. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Interlink Communication has no effect on the direction of FN Factory i.e., FN Factory and Interlink Communication go up and down completely randomly.

Pair Corralation between FN Factory and Interlink Communication

Assuming the 90 days horizon FN Factory Outlet is expected to under-perform the Interlink Communication. In addition to that, FN Factory is 1.37 times more volatile than Interlink Communication Public. It trades about -0.4 of its total potential returns per unit of risk. Interlink Communication Public is currently generating about -0.1 per unit of volatility. If you would invest  640.00  in Interlink Communication Public on October 11, 2024 and sell it today you would lose (65.00) from holding Interlink Communication Public or give up 10.16% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.31%
Values	Daily Returns

FN Factory Outlet  vs.  Interlink Communication Public

FN Factory Outlet

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days FN Factory Outlet has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's fundamental drivers remain quite persistent which may send shares a bit higher in February 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Interlink Communication

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Interlink Communication Public has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest conflicting performance, the Stock's fundamental drivers remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with FN Factory and Interlink Communication

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

The idea behind FN Factory Outlet and Interlink Communication Public 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.