Correlation Between Quant and FTM

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

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

Diversification Opportunities for Quant and FTM

0.64

Correlation Coefficient

Quant  FTM

Poor diversification

The 3 months correlation between Quant and FTM is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Quant and FTM in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FTM and Quant 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 Quant are associated (or correlated) with FTM. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FTM has no effect on the direction of Quant i.e., Quant and FTM go up and down completely randomly.

Pair Corralation between Quant and FTM

Assuming the 90 days trading horizon Quant is expected to under-perform the FTM. But the crypto coin apears to be less risky and, when comparing its historical volatility, Quant is 2.14 times less risky than FTM. The crypto coin trades about -0.12 of its potential returns per unit of risk. The FTM is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  68.00  in FTM on December 30, 2024 and sell it today you would lose (20.00) from holding FTM or give up 29.41% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Quant  vs.  FTM

Quant

Risk-Adjusted Performance

Very Weak

Over the last 90 days Quant has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Crypto's basic indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for Quant shareholders.

FTM

Risk-Adjusted Performance

Very Weak

Over the last 90 days FTM has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound primary indicators, FTM is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Quant and FTM

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

The idea behind Quant and FTM 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.

Check out your portfolio center.

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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.