Correlation Between Indutrade and Foresight Group
Can any of the company-specific risk be diversified away by investing in both Indutrade and Foresight Group 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 Indutrade and Foresight Group into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Indutrade AB and Foresight Group Holdings, you can compare the effects of market volatilities on Indutrade and Foresight Group 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 Indutrade with a short position of Foresight Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Indutrade and Foresight Group.
Diversification Opportunities for Indutrade and Foresight Group
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Indutrade and Foresight is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Indutrade AB and Foresight Group Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Foresight Group Holdings and Indutrade 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 Indutrade AB are associated (or correlated) with Foresight Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Foresight Group Holdings has no effect on the direction of Indutrade i.e., Indutrade and Foresight Group go up and down completely randomly.
Pair Corralation between Indutrade and Foresight Group
Assuming the 90 days trading horizon Indutrade is expected to generate 1.15 times less return on investment than Foresight Group. But when comparing it to its historical volatility, Indutrade AB is 1.14 times less risky than Foresight Group. It trades about 0.03 of its potential returns per unit of risk. Foresight Group Holdings is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 38,092 in Foresight Group Holdings on September 12, 2024 and sell it today you would earn a total of 3,708 from holding Foresight Group Holdings or generate 9.73% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Indutrade AB vs. Foresight Group Holdings
Performance |
| Timeline |
| Indutrade AB |
| Foresight Group Holdings |
Indutrade and Foresight Group Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Indutrade and Foresight Group
The main advantage of trading using opposite Indutrade and Foresight Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Indutrade position performs unexpectedly, Foresight Group 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 Foresight Group will offset losses from the drop in Foresight Group's long position.| Indutrade vs. Hong Kong Land | Indutrade vs. Neometals | Indutrade vs. Coor Service Management | Indutrade vs. Fidelity Sustainable USD |
| Foresight Group vs. Playtech Plc | Foresight Group vs. Blackstone Loan Financing | Foresight Group vs. Indutrade AB | Foresight Group vs. Applied Materials |
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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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