Correlation Between Fwog and PURA

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

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

Diversification Opportunities for Fwog and PURA

-0.47

Correlation Coefficient

Fwog  PURA

Very good diversification

The 3 months correlation between Fwog and PURA is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding Fwog and PURA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PURA 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 PURA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PURA has no effect on the direction of Fwog i.e., Fwog and PURA go up and down completely randomly.

Pair Corralation between Fwog and PURA

Assuming the 90 days trading horizon Fwog is expected to generate 20.68 times more return on investment than PURA. However, Fwog is 20.68 times more volatile than PURA. It trades about 0.06 of its potential returns per unit of risk. PURA is currently generating about 0.08 per unit of risk. If you would invest  0.00  in Fwog on October 10, 2024 and sell it today you would earn a total of  19.00  from holding Fwog or generate 9.223372036854776E16% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	25.93%
Values	Daily Returns

Fwog  vs.  PURA

Fwog

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Fwog are ranked lower than 9 (%) 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.

PURA

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Fwog and PURA

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

The idea behind Fwog and PURA 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.