Correlation Between Prime Financial and FleetPartners

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

By analyzing existing cross correlation between Prime Financial Group and FleetPartners Group, you can compare the effects of market volatilities on Prime Financial and FleetPartners 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 Prime Financial with a short position of FleetPartners. Check out your portfolio center. Please also check ongoing floating volatility patterns of Prime Financial and FleetPartners.

Diversification Opportunities for Prime Financial and FleetPartners

0.47

Correlation Coefficient

Prime Financial  FleetPartners

Very weak diversification

The 3 months correlation between Prime and FleetPartners is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Prime Financial Group and FleetPartners Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FleetPartners Group and Prime Financial 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 Prime Financial Group are associated (or correlated) with FleetPartners. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FleetPartners Group has no effect on the direction of Prime Financial i.e., Prime Financial and FleetPartners go up and down completely randomly.

Pair Corralation between Prime Financial and FleetPartners

Assuming the 90 days trading horizon Prime Financial Group is expected to generate 1.9 times more return on investment than FleetPartners. However, Prime Financial is 1.9 times more volatile than FleetPartners Group. It trades about -0.01 of its potential returns per unit of risk. FleetPartners Group is currently generating about -0.15 per unit of risk. If you would invest  23.00  in Prime Financial Group on October 22, 2024 and sell it today you would lose (1.00) from holding Prime Financial Group or give up 4.35% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	97.56%
Values	Daily Returns

Prime Financial Group  vs.  FleetPartners Group

Prime Financial Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Prime Financial Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable technical and fundamental indicators, Prime Financial is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

FleetPartners Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days FleetPartners Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, FleetPartners is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Prime Financial and FleetPartners

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

The idea behind Prime Financial Group and FleetPartners Group 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.