Correlation Between Global Connections and Firetrade Engineering

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

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

Diversification Opportunities for Global Connections and Firetrade Engineering

0.09

Correlation Coefficient

Global Connections  Firetrade Engineering

Significant diversification

The 3 months correlation between Global and Firetrade is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Global Connections Public and Firetrade Engineering Public in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Firetrade Engineering and Global Connections 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 Global Connections Public are associated (or correlated) with Firetrade Engineering. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Firetrade Engineering has no effect on the direction of Global Connections i.e., Global Connections and Firetrade Engineering go up and down completely randomly.

Pair Corralation between Global Connections and Firetrade Engineering

Assuming the 90 days horizon Global Connections Public is expected to under-perform the Firetrade Engineering. But the stock apears to be less risky and, when comparing its historical volatility, Global Connections Public is 1.57 times less risky than Firetrade Engineering. The stock trades about -0.04 of its potential returns per unit of risk. The Firetrade Engineering Public is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  150.00  in Firetrade Engineering Public on October 23, 2024 and sell it today you would earn a total of  1.00  from holding Firetrade Engineering Public or generate 0.67% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	95.0%
Values	Daily Returns

Global Connections Public  vs.  Firetrade Engineering Public

Global Connections Public

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Global Connections Public has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent fundamental drivers, Global Connections is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Firetrade Engineering

Risk-Adjusted Performance

2 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Firetrade Engineering Public are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent technical and fundamental indicators, Firetrade Engineering is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Global Connections and Firetrade Engineering

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

The idea behind Global Connections Public and Firetrade Engineering Public 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.