Correlation Between Nuscale Power and Fanuc

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

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

Diversification Opportunities for Nuscale Power and Fanuc

-0.47

Correlation Coefficient

Nuscale Power  Fanuc

Very good diversification

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

Pair Corralation between Nuscale Power and Fanuc

Considering the 90-day investment horizon Nuscale Power Corp is expected to generate 3.92 times more return on investment than Fanuc. However, Nuscale Power is 3.92 times more volatile than Fanuc. It trades about 0.06 of its potential returns per unit of risk. Fanuc is currently generating about -0.01 per unit of risk. If you would invest  1,034  in Nuscale Power Corp on September 3, 2024 and sell it today you would earn a total of  1,931  from holding Nuscale Power Corp or generate 186.75% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Nuscale Power Corp  vs.  Fanuc

Nuscale Power Corp

Risk-Adjusted Performance

23 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Nuscale Power Corp are ranked lower than 23 (%) of all global equities and portfolios over the last 90 days. Even with relatively inconsistent primary indicators, Nuscale Power reported solid returns over the last few months and may actually be approaching a breakup point.

Fanuc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Fanuc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest fragile performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Nuscale Power and Fanuc

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

The idea behind Nuscale Power Corp and Fanuc 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.