Correlation Between FTC and EMC2

Can any of the company-specific risk be diversified away by investing in both FTC and EMC2 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 FTC and EMC2 into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between FTC and EMC2, you can compare the effects of market volatilities on FTC and EMC2 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 FTC with a short position of EMC2. Check out your portfolio center. Please also check ongoing floating volatility patterns of FTC and EMC2.

Diversification Opportunities for FTC and EMC2

0.99

Correlation Coefficient

FTC  EMC2

No risk reduction

The 3 months correlation between FTC and EMC2 is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding FTC and EMC2 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EMC2 and FTC 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 FTC are associated (or correlated) with EMC2. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EMC2 has no effect on the direction of FTC i.e., FTC and EMC2 go up and down completely randomly.

Pair Corralation between FTC and EMC2

Assuming the 90 days trading horizon FTC is expected to under-perform the EMC2. But the crypto coin apears to be less risky and, when comparing its historical volatility, FTC is 1.03 times less risky than EMC2. The crypto coin trades about -0.06 of its potential returns per unit of risk. The EMC2 is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  0.05  in EMC2 on December 29, 2024 and sell it today you would lose  0.00  from holding EMC2 or give up 0.64% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	100.0%
Values	Daily Returns

FTC  vs.  EMC2

FTC

Risk-Adjusted Performance

Very Weak

Over the last 90 days FTC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Crypto's fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for FTC shareholders.

EMC2

Risk-Adjusted Performance

Weak

Over the last 90 days EMC2 has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound fundamental indicators, EMC2 is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with FTC and EMC2

The main advantage of trading using opposite FTC and EMC2 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if FTC position performs unexpectedly, EMC2 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 EMC2 will offset losses from the drop in EMC2's long position.

The idea behind FTC and EMC2 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.