Correlation Between First Colombia and Puget Technologies

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

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

Diversification Opportunities for First Colombia and Puget Technologies

-0.03

Correlation Coefficient

First Colombia  Puget Technologies

Good diversification

The 3 months correlation between First and Puget is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding First Colombia Gold and Puget Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Puget Technologies and First Colombia 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 First Colombia Gold are associated (or correlated) with Puget Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Puget Technologies has no effect on the direction of First Colombia i.e., First Colombia and Puget Technologies go up and down completely randomly.

Pair Corralation between First Colombia and Puget Technologies

Given the investment horizon of 90 days First Colombia Gold is expected to generate 2.37 times more return on investment than Puget Technologies. However, First Colombia is 2.37 times more volatile than Puget Technologies. It trades about 0.29 of its potential returns per unit of risk. Puget Technologies is currently generating about 0.11 per unit of risk. If you would invest  0.01  in First Colombia Gold on September 18, 2024 and sell it today you would earn a total of  0.00  from holding First Colombia Gold or generate 0.0% return on investment over 90 days.

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

First Colombia Gold  vs.  Puget Technologies

First Colombia Gold

Risk-Adjusted Performance

22 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in First Colombia Gold are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak technical and fundamental indicators, First Colombia exhibited solid returns over the last few months and may actually be approaching a breakup point.

Puget Technologies

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Puget Technologies are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, Puget Technologies exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with First Colombia and Puget Technologies

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

The idea behind First Colombia Gold and Puget Technologies 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 Transaction History module to view history of all your transactions and understand their impact on performance.