Correlation Between Fisher Paykel and EROAD

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

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

Diversification Opportunities for Fisher Paykel and EROAD

-0.4

Correlation Coefficient

Fisher Paykel  EROAD

Very good diversification

The 3 months correlation between Fisher and EROAD is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding Fisher Paykel Healthcare and EROAD in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EROAD and Fisher Paykel 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 Fisher Paykel Healthcare are associated (or correlated) with EROAD. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EROAD has no effect on the direction of Fisher Paykel i.e., Fisher Paykel and EROAD go up and down completely randomly.

Pair Corralation between Fisher Paykel and EROAD

Assuming the 90 days trading horizon Fisher Paykel is expected to generate 1.7 times less return on investment than EROAD. But when comparing it to its historical volatility, Fisher Paykel Healthcare is 3.15 times less risky than EROAD. It trades about 0.07 of its potential returns per unit of risk. EROAD is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  70.00  in EROAD on September 28, 2024 and sell it today you would earn a total of  33.00  from holding EROAD or generate 47.14% return on investment over 90 days.

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

Fisher Paykel Healthcare  vs.  EROAD

Fisher Paykel Healthcare

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Fisher Paykel Healthcare are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain technical indicators, Fisher Paykel may actually be approaching a critical reversion point that can send shares even higher in January 2025.

EROAD

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in EROAD are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable fundamental indicators, EROAD is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Fisher Paykel and EROAD

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

The idea behind Fisher Paykel Healthcare and EROAD 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.