Correlation Between Fanuc and Nuscale Power

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

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

Diversification Opportunities for Fanuc and Nuscale Power

-0.47

Correlation Coefficient

Fanuc  Nuscale Power

Very good diversification

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

Pair Corralation between Fanuc and Nuscale Power

Assuming the 90 days horizon Fanuc is expected to under-perform the Nuscale Power. But the pink sheet apears to be less risky and, when comparing its historical volatility, Fanuc is 4.62 times less risky than Nuscale Power. The pink sheet trades about -0.07 of its potential returns per unit of risk. The Nuscale Power Corp is currently generating about 0.3 of returns per unit of risk over similar time horizon. If you would invest  759.00  in Nuscale Power Corp on September 3, 2024 and sell it today you would earn a total of  2,206  from holding Nuscale Power Corp or generate 290.65% return on investment over 90 days.

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

Fanuc  vs.  Nuscale Power Corp

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.

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.

Pair Trading with Fanuc and Nuscale Power

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

The idea behind Fanuc and Nuscale Power Corp 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.