Correlation Between FSN E and Industrial Investment

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

By analyzing existing cross correlation between FSN E Commerce Ventures and Industrial Investment Trust, you can compare the effects of market volatilities on FSN E and Industrial Investment 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 FSN E with a short position of Industrial Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of FSN E and Industrial Investment.

Diversification Opportunities for FSN E and Industrial Investment

-0.88

Correlation Coefficient

FSN E  Industrial Investment

Pay attention - limited upside

The 3 months correlation between FSN and Industrial is -0.88. Overlapping area represents the amount of risk that can be diversified away by holding FSN E Commerce Ventures and Industrial Investment Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Industrial Investment and FSN E 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 FSN E Commerce Ventures are associated (or correlated) with Industrial Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Industrial Investment has no effect on the direction of FSN E i.e., FSN E and Industrial Investment go up and down completely randomly.

Pair Corralation between FSN E and Industrial Investment

Assuming the 90 days trading horizon FSN E Commerce Ventures is expected to under-perform the Industrial Investment. But the stock apears to be less risky and, when comparing its historical volatility, FSN E Commerce Ventures is 1.36 times less risky than Industrial Investment. The stock trades about -0.19 of its potential returns per unit of risk. The Industrial Investment Trust is currently generating about 0.32 of returns per unit of risk over similar time horizon. If you would invest  26,000  in Industrial Investment Trust on September 15, 2024 and sell it today you would earn a total of  13,170  from holding Industrial Investment Trust or generate 50.65% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	98.44%
Values	Daily Returns

FSN E Commerce Ventures  vs.  Industrial Investment Trust

FSN E Commerce

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days FSN E Commerce Ventures has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's forward-looking signals remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Industrial Investment

Risk-Adjusted Performance

24 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Industrial Investment Trust are ranked lower than 24 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, Industrial Investment unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with FSN E and Industrial Investment

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

The idea behind FSN E Commerce Ventures and Industrial Investment Trust 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.