Correlation Between Fwog and STRAX

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

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

Diversification Opportunities for Fwog and STRAX

0.08

Correlation Coefficient

Fwog  STRAX

Significant diversification

The 3 months correlation between Fwog and STRAX is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Fwog and STRAX in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on STRAX 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 STRAX. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of STRAX has no effect on the direction of Fwog i.e., Fwog and STRAX go up and down completely randomly.

Pair Corralation between Fwog and STRAX

Assuming the 90 days trading horizon Fwog is expected to generate 8.59 times more return on investment than STRAX. However, Fwog is 8.59 times more volatile than STRAX. It trades about 0.06 of its potential returns per unit of risk. STRAX is currently generating about -0.02 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  21.00  from holding Fwog or generate 9.223372036854776E16% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	58.01%
Values	Daily Returns

Fwog  vs.  STRAX

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.

STRAX

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in STRAX are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady fundamental indicators, STRAX exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Fwog and STRAX

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

The idea behind Fwog and STRAX 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.

Check out your portfolio center.

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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.