Correlation Between Focus Financial and European Equity

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

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

Diversification Opportunities for Focus Financial and European Equity

-0.75

Correlation Coefficient

Focus Financial  European Equity

Pay attention - limited upside

The 3 months correlation between Focus and European is -0.75. Overlapping area represents the amount of risk that can be diversified away by holding Focus Financial Partners and European Equity Closed in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on European Equity Closed and Focus Financial 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 Focus Financial Partners are associated (or correlated) with European Equity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of European Equity Closed has no effect on the direction of Focus Financial i.e., Focus Financial and European Equity go up and down completely randomly.

Pair Corralation between Focus Financial and European Equity

If you would invest  5,216  in Focus Financial Partners on August 30, 2024 and sell it today you would earn a total of  0.00  from holding Focus Financial Partners or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	1.56%
Values	Daily Returns

Focus Financial Partners  vs.  European Equity Closed

Focus Financial Partners

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Focus Financial Partners has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable fundamental indicators, Focus Financial is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

European Equity Closed

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days European Equity Closed has generated negative risk-adjusted returns adding no value to fund investors. Despite latest weak performance, the Fund's technical and fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Pair Trading with Focus Financial and European Equity

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

The idea behind Focus Financial Partners and European Equity Closed 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.

Check out your portfolio center.

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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.