Correlation Between Futura Medical and Spectra Systems

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

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

Diversification Opportunities for Futura Medical and Spectra Systems

0.31

Correlation Coefficient

Futura Medical  Spectra Systems

Weak diversification

The 3 months correlation between Futura and Spectra is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Futura Medical and Spectra Systems Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Spectra Systems Corp and Futura Medical 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 Futura Medical are associated (or correlated) with Spectra Systems. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Spectra Systems Corp has no effect on the direction of Futura Medical i.e., Futura Medical and Spectra Systems go up and down completely randomly.

Pair Corralation between Futura Medical and Spectra Systems

Assuming the 90 days trading horizon Futura Medical is expected to under-perform the Spectra Systems. In addition to that, Futura Medical is 1.2 times more volatile than Spectra Systems Corp. It trades about -0.03 of its total potential returns per unit of risk. Spectra Systems Corp is currently generating about 0.0 per unit of volatility. If you would invest  24,200  in Spectra Systems Corp on September 29, 2024 and sell it today you would lose (400.00) from holding Spectra Systems Corp or give up 1.65% of portfolio value over 90 days.

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

Futura Medical  vs.  Spectra Systems Corp

Futura Medical

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Futura Medical has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Futura Medical is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Spectra Systems Corp

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Futura Medical and Spectra Systems

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

The idea behind Futura Medical and Spectra Systems Corp 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.