Correlation Between Floridienne and Fountain

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

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

Diversification Opportunities for Floridienne and Fountain

0.15

Correlation Coefficient

Floridienne  Fountain

Average diversification

The 3 months correlation between Floridienne and Fountain is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding Floridienne and Fountain in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fountain and Floridienne 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 Floridienne are associated (or correlated) with Fountain. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fountain has no effect on the direction of Floridienne i.e., Floridienne and Fountain go up and down completely randomly.

Pair Corralation between Floridienne and Fountain

Assuming the 90 days trading horizon Floridienne is expected to generate 0.52 times more return on investment than Fountain. However, Floridienne is 1.92 times less risky than Fountain. It trades about 0.07 of its potential returns per unit of risk. Fountain is currently generating about -0.06 per unit of risk. If you would invest  63,500  in Floridienne on October 1, 2024 and sell it today you would earn a total of  5,000  from holding Floridienne or generate 7.87% return on investment over 90 days.

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

Floridienne  vs.  Fountain

Floridienne

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Floridienne are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Floridienne may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Fountain

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Fountain has generated negative risk-adjusted returns adding no value to investors with long positions. Even with weak performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in January 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Pair Trading with Floridienne and Fountain

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

The idea behind Floridienne and Fountain 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.