Correlation Between Focus Financial and Starfleet Innotech

Can any of the company-specific risk be diversified away by investing in both Focus Financial and Starfleet Innotech 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 Focus Financial and Starfleet Innotech into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Focus Financial Partners and Starfleet Innotech, you can compare the effects of market volatilities on Focus Financial and Starfleet Innotech 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 Focus Financial with a short position of Starfleet Innotech. Check out your portfolio center. Please also check ongoing floating volatility patterns of Focus Financial and Starfleet Innotech.

Diversification Opportunities for Focus Financial and Starfleet Innotech

0.27

Correlation Coefficient

Focus Financial  Starfleet Innotech

Modest diversification

The 3 months correlation between Focus and Starfleet is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Focus Financial Partners and Starfleet Innotech in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Starfleet Innotech and Focus Financial 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 Focus Financial Partners are associated (or correlated) with Starfleet Innotech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Starfleet Innotech has no effect on the direction of Focus Financial i.e., Focus Financial and Starfleet Innotech go up and down completely randomly.

Pair Corralation between Focus Financial and Starfleet Innotech

If you would invest  0.49  in Starfleet Innotech on September 16, 2024 and sell it today you would lose (0.04) from holding Starfleet Innotech or give up 8.16% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	4.76%
Values	Daily Returns

Focus Financial Partners  vs.  Starfleet Innotech

Focus Financial Partners

Risk-Adjusted Performance

0 of 100

Very Weak

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

Starfleet Innotech

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Starfleet Innotech are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady forward indicators, Starfleet Innotech displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Focus Financial and Starfleet Innotech

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

The idea behind Focus Financial Partners and Starfleet Innotech 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.