Correlation Between Futuris and Trucept

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

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

Diversification Opportunities for Futuris and Trucept

-0.07

Correlation Coefficient

Futuris  Trucept

Good diversification

The 3 months correlation between Futuris and Trucept is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding Futuris Company and Trucept in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Trucept and Futuris 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 Futuris Company are associated (or correlated) with Trucept. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Trucept has no effect on the direction of Futuris i.e., Futuris and Trucept go up and down completely randomly.

Pair Corralation between Futuris and Trucept

Given the investment horizon of 90 days Futuris is expected to generate 2.12 times less return on investment than Trucept. But when comparing it to its historical volatility, Futuris Company is 1.55 times less risky than Trucept. It trades about 0.04 of its potential returns per unit of risk. Trucept is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  3.80  in Trucept on August 31, 2024 and sell it today you would lose (0.30) from holding Trucept or give up 7.89% of portfolio value over 90 days.

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

Futuris Company  vs.  Trucept

Futuris Company

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Futuris Company are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, Futuris unveiled solid returns over the last few months and may actually be approaching a breakup point.

Trucept

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Trucept are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Even with relatively fragile technical and fundamental indicators, Trucept reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Futuris and Trucept

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

The idea behind Futuris Company and Trucept 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 CEOs Directory module to screen CEOs from public companies around the world.