Correlation Between Futuretech and Humatech

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

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

Diversification Opportunities for Futuretech and Humatech

-0.37

Correlation Coefficient

Futuretech  Humatech

Very good diversification

The 3 months correlation between Futuretech and Humatech is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding Futuretech II Acquisition and Humatech in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Humatech and Futuretech 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 Futuretech II Acquisition are associated (or correlated) with Humatech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Humatech has no effect on the direction of Futuretech i.e., Futuretech and Humatech go up and down completely randomly.

Pair Corralation between Futuretech and Humatech

Given the investment horizon of 90 days Futuretech is expected to generate 225.85 times less return on investment than Humatech. But when comparing it to its historical volatility, Futuretech II Acquisition is 69.87 times less risky than Humatech. It trades about 0.05 of its potential returns per unit of risk. Humatech is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  0.01  in Humatech on December 23, 2024 and sell it today you would earn a total of  0.00  from holding Humatech or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	76.56%
Values	Daily Returns

Futuretech II Acquisition  vs.  Humatech

Futuretech II Acquisition

Risk-Adjusted Performance

Insignificant

Over the last 90 days Futuretech II Acquisition has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly unsteady forward indicators, Futuretech may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Humatech

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Humatech are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating primary indicators, Humatech unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Futuretech and Humatech

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

The idea behind Futuretech II Acquisition and Humatech 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.