Correlation Between FPT Digital and HUD1 Investment

Can any of the company-specific risk be diversified away by investing in both FPT Digital and HUD1 Investment 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 FPT Digital and HUD1 Investment into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between FPT Digital Retail and HUD1 Investment and, you can compare the effects of market volatilities on FPT Digital and HUD1 Investment 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 FPT Digital with a short position of HUD1 Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of FPT Digital and HUD1 Investment.

Diversification Opportunities for FPT Digital and HUD1 Investment

0.27

Correlation Coefficient

FPT Digital  HUD1 Investment

Modest diversification

The 3 months correlation between FPT and HUD1 is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding FPT Digital Retail and HUD1 Investment and in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HUD1 Investment and FPT Digital 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 FPT Digital Retail are associated (or correlated) with HUD1 Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HUD1 Investment has no effect on the direction of FPT Digital i.e., FPT Digital and HUD1 Investment go up and down completely randomly.

Pair Corralation between FPT Digital and HUD1 Investment

Assuming the 90 days trading horizon FPT Digital is expected to generate 1.77 times less return on investment than HUD1 Investment. But when comparing it to its historical volatility, FPT Digital Retail is 5.14 times less risky than HUD1 Investment. It trades about 0.05 of its potential returns per unit of risk. HUD1 Investment and is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  649,000  in HUD1 Investment and on September 17, 2024 and sell it today you would lose (7,000) from holding HUD1 Investment and or give up 1.08% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	60.0%
Values	Daily Returns

FPT Digital Retail  vs.  HUD1 Investment and

FPT Digital Retail

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in FPT Digital Retail are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, FPT Digital is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

HUD1 Investment

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days HUD1 Investment and has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, HUD1 Investment is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with FPT Digital and HUD1 Investment

The main advantage of trading using opposite FPT Digital and HUD1 Investment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if FPT Digital position performs unexpectedly, HUD1 Investment 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 HUD1 Investment will offset losses from the drop in HUD1 Investment's long position.

The idea behind FPT Digital Retail and HUD1 Investment and 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.