Correlation Between Fwog and Ampleforth

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

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

Diversification Opportunities for Fwog and Ampleforth

0.06

Correlation Coefficient

Fwog  Ampleforth

Significant diversification

The 3 months correlation between Fwog and Ampleforth is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding Fwog and Ampleforth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ampleforth and Fwog 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 Fwog are associated (or correlated) with Ampleforth. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ampleforth has no effect on the direction of Fwog i.e., Fwog and Ampleforth go up and down completely randomly.

Pair Corralation between Fwog and Ampleforth

Assuming the 90 days trading horizon Fwog is expected to generate 20.69 times more return on investment than Ampleforth. However, Fwog is 20.69 times more volatile than Ampleforth. It trades about 0.14 of its potential returns per unit of risk. Ampleforth is currently generating about 0.04 per unit of risk. If you would invest  43.00  in Fwog on October 6, 2024 and sell it today you would lose (10.00) from holding Fwog or give up 23.26% of portfolio value over 90 days.

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

Fwog  vs.  Ampleforth

Fwog

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Fwog are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady fundamental indicators, Fwog exhibited solid returns over the last few months and may actually be approaching a breakup point.

Ampleforth

Risk-Adjusted Performance

3 of 100

Insignificant

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

Pair Trading with Fwog and Ampleforth

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

The idea behind Fwog and Ampleforth 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.