Correlation Between FD Technologies and Draper Esprit

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

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

Diversification Opportunities for FD Technologies and Draper Esprit

-0.26

Correlation Coefficient

FD Technologies  Draper Esprit

Very good diversification

The 3 months correlation between GYQ and Draper is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding FD Technologies PLC and Draper Esprit plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Draper Esprit plc and FD Technologies 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 FD Technologies PLC are associated (or correlated) with Draper Esprit. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Draper Esprit plc has no effect on the direction of FD Technologies i.e., FD Technologies and Draper Esprit go up and down completely randomly.

Pair Corralation between FD Technologies and Draper Esprit

Assuming the 90 days trading horizon FD Technologies PLC is expected to under-perform the Draper Esprit. But the stock apears to be less risky and, when comparing its historical volatility, FD Technologies PLC is 3.69 times less risky than Draper Esprit. The stock trades about -0.17 of its potential returns per unit of risk. The Draper Esprit plc is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  356.00  in Draper Esprit plc on December 19, 2024 and sell it today you would lose (6.00) from holding Draper Esprit plc or give up 1.69% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.39%
Values	Daily Returns

FD Technologies PLC  vs.  Draper Esprit plc

FD Technologies PLC

Risk-Adjusted Performance

Very Weak

Over the last 90 days FD Technologies PLC has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest weak performance, the Stock's basic indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

Draper Esprit plc

Risk-Adjusted Performance

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 relatively invariable basic indicators, Draper Esprit is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with FD Technologies and Draper Esprit

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

The idea behind FD Technologies PLC and Draper Esprit 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.