Correlation Between Global Education and Fineotex Chemical

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

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

Diversification Opportunities for Global Education and Fineotex Chemical

-0.21

Correlation Coefficient

Global Education  Fineotex Chemical

Very good diversification

The 3 months correlation between Global and Fineotex is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding Global Education Limited and Fineotex Chemical Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fineotex Chemical and Global Education 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 Global Education Limited are associated (or correlated) with Fineotex Chemical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fineotex Chemical has no effect on the direction of Global Education i.e., Global Education and Fineotex Chemical go up and down completely randomly.

Pair Corralation between Global Education and Fineotex Chemical

Assuming the 90 days trading horizon Global Education Limited is expected to generate 54.26 times more return on investment than Fineotex Chemical. However, Global Education is 54.26 times more volatile than Fineotex Chemical Limited. It trades about 0.11 of its potential returns per unit of risk. Fineotex Chemical Limited is currently generating about -0.08 per unit of risk. If you would invest  8,025  in Global Education Limited on September 12, 2024 and sell it today you would earn a total of  579.00  from holding Global Education Limited or generate 7.21% return on investment over 90 days.

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

Global Education Limited  vs.  Fineotex Chemical Limited

Global Education

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Global Education Limited are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unfluctuating fundamental drivers, Global Education sustained solid returns over the last few months and may actually be approaching a breakup point.

Fineotex Chemical

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Fineotex Chemical Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Global Education and Fineotex Chemical

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

The idea behind Global Education Limited and Fineotex Chemical Limited 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.

Check out your portfolio center.

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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.