Correlation Between Draper Esprit and FD Technologies

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

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

Diversification Opportunities for Draper Esprit and FD Technologies

-0.52

Correlation Coefficient

Draper Esprit  FD Technologies

Excellent diversification

The 3 months correlation between Draper and GYQ is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding Draper Esprit plc and FD Technologies PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FD Technologies PLC and Draper Esprit 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 Draper Esprit plc are associated (or correlated) with FD Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FD Technologies PLC has no effect on the direction of Draper Esprit i.e., Draper Esprit and FD Technologies go up and down completely randomly.

Pair Corralation between Draper Esprit and FD Technologies

Assuming the 90 days trading horizon Draper Esprit plc is expected to under-perform the FD Technologies. But the stock apears to be less risky and, when comparing its historical volatility, Draper Esprit plc is 1.03 times less risky than FD Technologies. The stock trades about -0.02 of its potential returns per unit of risk. The FD Technologies PLC is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  1,500  in FD Technologies PLC on October 11, 2024 and sell it today you would earn a total of  620.00  from holding FD Technologies PLC or generate 41.33% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Draper Esprit plc  vs.  FD Technologies PLC

Draper Esprit plc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Draper Esprit plc has generated negative risk-adjusted returns adding no value to investors with long positions. Even with weak performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in February 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

FD Technologies PLC

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in FD Technologies PLC are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, FD Technologies may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Draper Esprit and FD Technologies

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

The idea behind Draper Esprit plc and FD Technologies PLC 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.