Correlation Between Firetrade Engineering and Dohome Public

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

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

Diversification Opportunities for Firetrade Engineering and Dohome Public

-0.52

Correlation Coefficient

Firetrade Engineering  Dohome Public

Excellent diversification

The 3 months correlation between Firetrade and Dohome is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding Firetrade Engineering Public and Dohome Public in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dohome Public and Firetrade Engineering 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 Firetrade Engineering Public are associated (or correlated) with Dohome Public. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dohome Public has no effect on the direction of Firetrade Engineering i.e., Firetrade Engineering and Dohome Public go up and down completely randomly.

Pair Corralation between Firetrade Engineering and Dohome Public

Assuming the 90 days trading horizon Firetrade Engineering Public is expected to generate 0.51 times more return on investment than Dohome Public. However, Firetrade Engineering Public is 1.96 times less risky than Dohome Public. It trades about 0.08 of its potential returns per unit of risk. Dohome Public is currently generating about -0.09 per unit of risk. If you would invest  145.00  in Firetrade Engineering Public on September 15, 2024 and sell it today you would earn a total of  7.00  from holding Firetrade Engineering Public or generate 4.83% return on investment over 90 days.

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

Firetrade Engineering Public  vs.  Dohome Public

Firetrade Engineering

Risk-Adjusted Performance

6 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Firetrade Engineering Public are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent technical and fundamental indicators, Firetrade Engineering is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Dohome Public

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Dohome Public has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest conflicting performance, the Stock's technical indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Firetrade Engineering and Dohome Public

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

The idea behind Firetrade Engineering Public and Dohome Public 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.