Correlation Between Federal Signal and Soken Chemical

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

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

Diversification Opportunities for Federal Signal and Soken Chemical

0.0

Correlation Coefficient

Federal Signal  Soken Chemical

Pay attention - limited upside

The 3 months correlation between Federal and Soken is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Federal Signal and Soken Chemical Engineering in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Soken Chemical Engin and Federal Signal 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 Federal Signal are associated (or correlated) with Soken Chemical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Soken Chemical Engin has no effect on the direction of Federal Signal i.e., Federal Signal and Soken Chemical go up and down completely randomly.

Pair Corralation between Federal Signal and Soken Chemical

If you would invest  8,089  in Federal Signal on October 9, 2024 and sell it today you would earn a total of  711.00  from holding Federal Signal or generate 8.79% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Federal Signal  vs.  Soken Chemical Engineering

Federal Signal

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Federal Signal are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Federal Signal may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Soken Chemical Engin

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Federal Signal and Soken Chemical

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

The idea behind Federal Signal and Soken Chemical Engineering 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.