Correlation Between Danaher and FibraHotel

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

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

Diversification Opportunities for Danaher and FibraHotel

-0.69

Correlation Coefficient

Danaher  FibraHotel

Excellent diversification

The 3 months correlation between Danaher and FibraHotel is -0.69. Overlapping area represents the amount of risk that can be diversified away by holding Danaher and FibraHotel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FibraHotel and Danaher 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 Danaher are associated (or correlated) with FibraHotel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FibraHotel has no effect on the direction of Danaher i.e., Danaher and FibraHotel go up and down completely randomly.

Pair Corralation between Danaher and FibraHotel

Assuming the 90 days trading horizon Danaher is expected to under-perform the FibraHotel. But the stock apears to be less risky and, when comparing its historical volatility, Danaher is 1.35 times less risky than FibraHotel. The stock trades about -0.08 of its potential returns per unit of risk. The FibraHotel is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  811.00  in FibraHotel on September 25, 2024 and sell it today you would earn a total of  186.00  from holding FibraHotel or generate 22.93% return on investment over 90 days.

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

Danaher  vs.  FibraHotel

Danaher

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Danaher has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak 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.

FibraHotel

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in FibraHotel are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak technical indicators, FibraHotel sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Danaher and FibraHotel

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

The idea behind Danaher and FibraHotel 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.