Correlation Between FMS Enterprises and Highcon Systems

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

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

Diversification Opportunities for FMS Enterprises and Highcon Systems

-0.42

Correlation Coefficient

FMS Enterprises  Highcon Systems

Very good diversification

The 3 months correlation between FMS and Highcon is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding FMS Enterprises Migun and Highcon Systems in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Highcon Systems and FMS Enterprises 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 FMS Enterprises Migun are associated (or correlated) with Highcon Systems. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Highcon Systems has no effect on the direction of FMS Enterprises i.e., FMS Enterprises and Highcon Systems go up and down completely randomly.

Pair Corralation between FMS Enterprises and Highcon Systems

Assuming the 90 days trading horizon FMS Enterprises Migun is expected to generate 0.41 times more return on investment than Highcon Systems. However, FMS Enterprises Migun is 2.42 times less risky than Highcon Systems. It trades about 0.1 of its potential returns per unit of risk. Highcon Systems is currently generating about 0.02 per unit of risk. If you would invest  1,349,873  in FMS Enterprises Migun on September 26, 2024 and sell it today you would earn a total of  90,127  from holding FMS Enterprises Migun or generate 6.68% return on investment over 90 days.

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

FMS Enterprises Migun  vs.  Highcon Systems

FMS Enterprises Migun

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in FMS Enterprises Migun are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, FMS Enterprises sustained solid returns over the last few months and may actually be approaching a breakup point.

Highcon Systems

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Highcon Systems has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with FMS Enterprises and Highcon Systems

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

The idea behind FMS Enterprises Migun and Highcon Systems 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.