Correlation Between Futura Medical and First

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

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

Diversification Opportunities for Futura Medical and First

0.26

Correlation Coefficient

Futura Medical  First

Modest diversification

The 3 months correlation between Futura and First is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Futura Medical and First Class Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Class Metals and Futura Medical 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 Futura Medical are associated (or correlated) with First. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Class Metals has no effect on the direction of Futura Medical i.e., Futura Medical and First go up and down completely randomly.

Pair Corralation between Futura Medical and First

Assuming the 90 days trading horizon Futura Medical is expected to generate 0.89 times more return on investment than First. However, Futura Medical is 1.13 times less risky than First. It trades about -0.01 of its potential returns per unit of risk. First Class Metals is currently generating about -0.07 per unit of risk. If you would invest  5,290  in Futura Medical on October 24, 2024 and sell it today you would lose (2,115) from holding Futura Medical or give up 39.98% of portfolio value over 90 days.

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

Futura Medical  vs.  First Class Metals

Futura Medical

Risk-Adjusted Performance

0 of 100

Very Weak

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

First Class Metals

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Futura Medical and First

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

The idea behind Futura Medical and First Class Metals 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.