Correlation Between FRONT and Sui

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

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

Diversification Opportunities for FRONT and Sui

-0.67

Correlation Coefficient

FRONT  Sui

Excellent diversification

The 3 months correlation between FRONT and Sui is -0.67. Overlapping area represents the amount of risk that can be diversified away by holding FRONT and Sui in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sui and FRONT 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 FRONT are associated (or correlated) with Sui. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sui has no effect on the direction of FRONT i.e., FRONT and Sui go up and down completely randomly.

Pair Corralation between FRONT and Sui

Assuming the 90 days trading horizon FRONT is expected to generate 4.48 times more return on investment than Sui. However, FRONT is 4.48 times more volatile than Sui. It trades about 0.09 of its potential returns per unit of risk. Sui is currently generating about 0.38 per unit of risk. If you would invest  73.00  in FRONT on September 1, 2024 and sell it today you would lose (6.00) from holding FRONT or give up 8.22% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

FRONT  vs.  Sui

FRONT

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in FRONT are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady fundamental indicators, FRONT exhibited solid returns over the last few months and may actually be approaching a breakup point.

Sui

Risk-Adjusted Performance

29 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Sui are ranked lower than 29 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady forward indicators, Sui exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with FRONT and Sui

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

The idea behind FRONT and Sui 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.

Check out your portfolio center.

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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.