Correlation Between Fortran Corp and Farmhouse

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

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

Diversification Opportunities for Fortran Corp and Farmhouse

-0.27

Correlation Coefficient

Fortran Corp  Farmhouse

Very good diversification

The 3 months correlation between Fortran and Farmhouse is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding Fortran Corp and Farmhouse in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Farmhouse and Fortran Corp 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 Fortran Corp are associated (or correlated) with Farmhouse. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Farmhouse has no effect on the direction of Fortran Corp i.e., Fortran Corp and Farmhouse go up and down completely randomly.

Pair Corralation between Fortran Corp and Farmhouse

Given the investment horizon of 90 days Fortran Corp is expected to generate 1.72 times more return on investment than Farmhouse. However, Fortran Corp is 1.72 times more volatile than Farmhouse. It trades about 0.15 of its potential returns per unit of risk. Farmhouse is currently generating about 0.0 per unit of risk. If you would invest  1.00  in Fortran Corp on October 1, 2024 and sell it today you would earn a total of  1.00  from holding Fortran Corp or generate 100.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

Fortran Corp  vs.  Farmhouse

Fortran Corp

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Fortran Corp are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of very uncertain basic indicators, Fortran Corp displayed solid returns over the last few months and may actually be approaching a breakup point.

Farmhouse

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Fortran Corp and Farmhouse

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

The idea behind Fortran Corp and Farmhouse 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..