Correlation Between Van De and Fountain

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

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

Diversification Opportunities for Van De and Fountain

0.0

Correlation Coefficient

Van De  Fountain

Pay attention - limited upside

The 3 months correlation between Van and Fountain is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Van de Velde and Fountain in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fountain and Van De 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 Van de Velde are associated (or correlated) with Fountain. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fountain has no effect on the direction of Van De i.e., Van De and Fountain go up and down completely randomly.

Pair Corralation between Van De and Fountain

Assuming the 90 days trading horizon Van De is expected to generate 3.44 times less return on investment than Fountain. But when comparing it to its historical volatility, Van de Velde is 4.32 times less risky than Fountain. It trades about 0.11 of its potential returns per unit of risk. Fountain is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  132.00  in Fountain on December 29, 2024 and sell it today you would earn a total of  24.00  from holding Fountain or generate 18.18% return on investment over 90 days.

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

Van de Velde  vs.  Fountain

Van de Velde

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Van de Velde are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, Van De is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Fountain

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Fountain are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Fountain reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Van De and Fountain

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

The idea behind Van de Velde and Fountain 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.