Correlation Between Hour Loop and Fundamental Global

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

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

Diversification Opportunities for Hour Loop and Fundamental Global

0.4

Correlation Coefficient

Hour Loop  Fundamental Global

Very weak diversification

The 3 months correlation between Hour and Fundamental is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Hour Loop and Fundamental Global in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fundamental Global and Hour Loop 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 Hour Loop are associated (or correlated) with Fundamental Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fundamental Global has no effect on the direction of Hour Loop i.e., Hour Loop and Fundamental Global go up and down completely randomly.

Pair Corralation between Hour Loop and Fundamental Global

Given the investment horizon of 90 days Hour Loop is expected to generate 4.42 times less return on investment than Fundamental Global. But when comparing it to its historical volatility, Hour Loop is 1.8 times less risky than Fundamental Global. It trades about 0.04 of its potential returns per unit of risk. Fundamental Global is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  2,625  in Fundamental Global on August 31, 2024 and sell it today you would earn a total of  774.00  from holding Fundamental Global or generate 29.49% return on investment over 90 days.

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

Hour Loop  vs.  Fundamental Global

Hour Loop

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Hour Loop are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Hour Loop reported solid returns over the last few months and may actually be approaching a breakup point.

Fundamental Global

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Fundamental Global are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak technical and fundamental indicators, Fundamental Global reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Hour Loop and Fundamental Global

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

The idea behind Hour Loop and Fundamental Global 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.