Correlation Between Fuller Thaler and Pear Tree

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

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

Diversification Opportunities for Fuller Thaler and Pear Tree

0.9

Correlation Coefficient

Fuller Thaler  Pear Tree

Almost no diversification

The 3 months correlation between Fuller and Pear is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Fuller Thaler Behavioral and Pear Tree Polaris in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pear Tree Polaris and Fuller Thaler 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 Fuller Thaler Behavioral are associated (or correlated) with Pear Tree. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pear Tree Polaris has no effect on the direction of Fuller Thaler i.e., Fuller Thaler and Pear Tree go up and down completely randomly.

Pair Corralation between Fuller Thaler and Pear Tree

Assuming the 90 days horizon Fuller Thaler Behavioral is expected to under-perform the Pear Tree. In addition to that, Fuller Thaler is 1.03 times more volatile than Pear Tree Polaris. It trades about -0.09 of its total potential returns per unit of risk. Pear Tree Polaris is currently generating about -0.04 per unit of volatility. If you would invest  3,463  in Pear Tree Polaris on December 26, 2024 and sell it today you would lose (98.00) from holding Pear Tree Polaris or give up 2.83% of portfolio value over 90 days.

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

Fuller Thaler Behavioral  vs.  Pear Tree Polaris

Fuller Thaler Behavioral

Risk-Adjusted Performance

Very Weak

Over the last 90 days Fuller Thaler Behavioral has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Fuller Thaler is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pear Tree Polaris

Risk-Adjusted Performance

Very Weak

Over the last 90 days Pear Tree Polaris has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Pear Tree is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Fuller Thaler and Pear Tree

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

The idea behind Fuller Thaler Behavioral and Pear Tree Polaris 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..