Correlation Between Fantom and Core

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

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

Diversification Opportunities for Fantom and Core

0.59

Correlation Coefficient

Fantom  Core

Very weak diversification

The 3 months correlation between Fantom and Core is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Fantom and Core in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Core and Fantom 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 Fantom are associated (or correlated) with Core. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Core has no effect on the direction of Fantom i.e., Fantom and Core go up and down completely randomly.

Pair Corralation between Fantom and Core

Assuming the 90 days trading horizon Fantom is expected to generate 1.0 times more return on investment than Core. However, Fantom is 1.0 times more volatile than Core. It trades about 0.23 of its potential returns per unit of risk. Core is currently generating about 0.19 per unit of risk. If you would invest  39.00  in Fantom on September 2, 2024 and sell it today you would earn a total of  66.00  from holding Fantom or generate 169.23% return on investment over 90 days.

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

Fantom  vs.  Core

Fantom

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Fantom are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady primary indicators, Fantom exhibited solid returns over the last few months and may actually be approaching a breakup point.

Core

Risk-Adjusted Performance

15 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Core are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady fundamental indicators, Core exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Fantom and Core

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

The idea behind Fantom and Core 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.