Correlation Between Arts Way and FDCTech

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

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

Diversification Opportunities for Arts Way and FDCTech

-0.46

Correlation Coefficient

Arts Way  FDCTech

Very good diversification

The 3 months correlation between Arts and FDCTech is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding Arts Way Manufacturing Co and FDCTech in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FDCTech and Arts Way 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 Arts Way Manufacturing Co are associated (or correlated) with FDCTech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FDCTech has no effect on the direction of Arts Way i.e., Arts Way and FDCTech go up and down completely randomly.

Pair Corralation between Arts Way and FDCTech

Given the investment horizon of 90 days Arts Way Manufacturing Co is expected to under-perform the FDCTech. But the stock apears to be less risky and, when comparing its historical volatility, Arts Way Manufacturing Co is 79.61 times less risky than FDCTech. The stock trades about -0.1 of its potential returns per unit of risk. The FDCTech is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  0.01  in FDCTech on September 3, 2024 and sell it today you would earn a total of  0.49  from holding FDCTech or generate 4900.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.46%
Values	Daily Returns

Arts Way Manufacturing Co  vs.  FDCTech

Arts Way Manufacturing

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Arts Way Manufacturing Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in January 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

FDCTech

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in FDCTech are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile fundamental indicators, FDCTech unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Arts Way and FDCTech

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

The idea behind Arts Way Manufacturing Co and FDCTech 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.