Correlation Between Federal Signal and Vow ASA
Can any of the company-specific risk be diversified away by investing in both Federal Signal and Vow ASA 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 Vow ASA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Federal Signal and Vow ASA, you can compare the effects of market volatilities on Federal Signal and Vow ASA 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 Vow ASA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Federal Signal and Vow ASA.
Diversification Opportunities for Federal Signal and Vow ASA
0.44 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Federal and Vow is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Federal Signal and Vow ASA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vow ASA 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 Vow ASA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vow ASA has no effect on the direction of Federal Signal i.e., Federal Signal and Vow ASA go up and down completely randomly.
Pair Corralation between Federal Signal and Vow ASA
Considering the 90-day investment horizon Federal Signal is expected to generate 0.44 times more return on investment than Vow ASA. However, Federal Signal is 2.25 times less risky than Vow ASA. It trades about -0.13 of its potential returns per unit of risk. Vow ASA is currently generating about -0.07 per unit of risk. If you would invest 9,811 in Federal Signal on December 2, 2024 and sell it today you would lose (1,683) from holding Federal Signal or give up 17.15% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Weak |
Accuracy | 93.85% |
Values | Daily Returns |
Federal Signal vs. Vow ASA
Performance |
Timeline |
Federal Signal |
Vow ASA |
Federal Signal and Vow ASA Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Federal Signal and Vow ASA
The main advantage of trading using opposite Federal Signal and Vow ASA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Federal Signal position performs unexpectedly, Vow ASA 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 Vow ASA will offset losses from the drop in Vow ASA's long position.Federal Signal vs. Energy Recovery | Federal Signal vs. CECO Environmental Corp | Federal Signal vs. 374Water Common Stock | Federal Signal vs. CO2 Solutions |
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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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.
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