Correlation Between FIREWEED METALS and F5 Networks

Can any of the company-specific risk be diversified away by investing in both FIREWEED METALS and F5 Networks 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 FIREWEED METALS and F5 Networks into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between FIREWEED METALS P and F5 Networks, you can compare the effects of market volatilities on FIREWEED METALS and F5 Networks 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 FIREWEED METALS with a short position of F5 Networks. Check out your portfolio center. Please also check ongoing floating volatility patterns of FIREWEED METALS and F5 Networks.

Diversification Opportunities for FIREWEED METALS and F5 Networks

-0.26

Correlation Coefficient

FIREWEED METALS  F5 Networks

Very good diversification

The 3 months correlation between FIREWEED and FFV is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding FIREWEED METALS P and F5 Networks in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on F5 Networks and FIREWEED METALS 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 FIREWEED METALS P are associated (or correlated) with F5 Networks. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of F5 Networks has no effect on the direction of FIREWEED METALS i.e., FIREWEED METALS and F5 Networks go up and down completely randomly.

Pair Corralation between FIREWEED METALS and F5 Networks

Assuming the 90 days horizon FIREWEED METALS P is expected to generate 2.42 times more return on investment than F5 Networks. However, FIREWEED METALS is 2.42 times more volatile than F5 Networks. It trades about 0.13 of its potential returns per unit of risk. F5 Networks is currently generating about 0.2 per unit of risk. If you would invest  90.00  in FIREWEED METALS P on October 11, 2024 and sell it today you would earn a total of  12.00  from holding FIREWEED METALS P or generate 13.33% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	97.44%
Values	Daily Returns

FIREWEED METALS P  vs.  F5 Networks

FIREWEED METALS P

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in FIREWEED METALS P are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, FIREWEED METALS is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

F5 Networks

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in F5 Networks are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, F5 Networks reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with FIREWEED METALS and F5 Networks

The main advantage of trading using opposite FIREWEED METALS and F5 Networks positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if FIREWEED METALS position performs unexpectedly, F5 Networks 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 F5 Networks will offset losses from the drop in F5 Networks' long position.

The idea behind FIREWEED METALS P and F5 Networks 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.