Correlation Between Trent and FCS Software

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

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

Diversification Opportunities for Trent and FCS Software

-0.08

Correlation Coefficient

Trent  FCS Software

Good diversification

The 3 months correlation between Trent and FCS is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding Trent Limited and FCS Software Solutions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FCS Software Solutions and Trent 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 Trent Limited are associated (or correlated) with FCS Software. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FCS Software Solutions has no effect on the direction of Trent i.e., Trent and FCS Software go up and down completely randomly.

Pair Corralation between Trent and FCS Software

Assuming the 90 days trading horizon Trent Limited is expected to generate 0.79 times more return on investment than FCS Software. However, Trent Limited is 1.27 times less risky than FCS Software. It trades about 0.11 of its potential returns per unit of risk. FCS Software Solutions is currently generating about -0.13 per unit of risk. If you would invest  650,550  in Trent Limited on October 9, 2024 and sell it today you would earn a total of  49,285  from holding Trent Limited or generate 7.58% return on investment over 90 days.

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

Trent Limited  vs.  FCS Software Solutions

Trent Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Trent Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's technical and fundamental indicators remain very healthy which may send shares a bit higher in February 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

FCS Software Solutions

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days FCS Software Solutions has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Trent and FCS Software

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

The idea behind Trent Limited and FCS Software Solutions 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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.