Correlation Between FDO DE and FDO INV

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

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

Diversification Opportunities for FDO DE and FDO INV

-0.22

Correlation Coefficient

FDO DE  FDO INV

Very good diversification

The 3 months correlation between FDO and FDO is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding FDO DE INVEST and FDO INV IMOB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FDO INV IMOB and FDO DE 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 FDO DE INVEST are associated (or correlated) with FDO INV. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FDO INV IMOB has no effect on the direction of FDO DE i.e., FDO DE and FDO INV go up and down completely randomly.

Pair Corralation between FDO DE and FDO INV

Assuming the 90 days trading horizon FDO DE is expected to generate 912.88 times less return on investment than FDO INV. But when comparing it to its historical volatility, FDO DE INVEST is 82.95 times less risky than FDO INV. It trades about 0.01 of its potential returns per unit of risk. FDO INV IMOB is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  19.00  in FDO INV IMOB on December 4, 2024 and sell it today you would earn a total of  144,231  from holding FDO INV IMOB or generate 759110.53% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	60.29%
Values	Daily Returns

FDO DE INVEST  vs.  FDO INV IMOB

FDO DE INVEST

Risk-Adjusted Performance

Very Weak

Over the last 90 days FDO DE INVEST has generated negative risk-adjusted returns adding no value to fund investors. Despite somewhat strong primary indicators, FDO DE is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

FDO INV IMOB

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in FDO INV IMOB are ranked lower than 12 (%) of all funds and portfolios of funds over the last 90 days. Despite somewhat strong basic indicators, FDO INV is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with FDO DE and FDO INV

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

The idea behind FDO DE INVEST and FDO INV IMOB 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.