Correlation Between FSP Technology and Dow Jones
Can any of the company-specific risk be diversified away by investing in both FSP Technology and Dow Jones 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 FSP Technology and Dow Jones into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between FSP Technology and Dow Jones Industrial, you can compare the effects of market volatilities on FSP Technology and Dow Jones 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 FSP Technology with a short position of Dow Jones. Check out your portfolio center. Please also check ongoing floating volatility patterns of FSP Technology and Dow Jones.
Diversification Opportunities for FSP Technology and Dow Jones
0.63 | Correlation Coefficient |
Poor diversification
The 3 months correlation between FSP and Dow is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding FSP Technology and Dow Jones Industrial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dow Jones Industrial and FSP Technology 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 FSP Technology are associated (or correlated) with Dow Jones. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dow Jones Industrial has no effect on the direction of FSP Technology i.e., FSP Technology and Dow Jones go up and down completely randomly.
Pair Corralation between FSP Technology and Dow Jones
Assuming the 90 days trading horizon FSP Technology is expected to generate 2.68 times more return on investment than Dow Jones. However, FSP Technology is 2.68 times more volatile than Dow Jones Industrial. It trades about 0.07 of its potential returns per unit of risk. Dow Jones Industrial is currently generating about 0.09 per unit of risk. If you would invest 4,000 in FSP Technology on September 4, 2024 and sell it today you would earn a total of 2,430 from holding FSP Technology or generate 60.75% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 98.02% |
| Values | Daily Returns |
FSP Technology vs. Dow Jones Industrial
Performance |
| Timeline |
FSP Technology and Dow Jones Volatility Contrast
Predicted Return Density |
| Returns |
FSP Technology
Pair trading matchups for FSP Technology
Dow Jones Industrial
Pair trading matchups for Dow Jones
Pair Trading with FSP Technology and Dow Jones
The main advantage of trading using opposite FSP Technology and Dow Jones positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if FSP Technology position performs unexpectedly, Dow Jones 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 Dow Jones will offset losses from the drop in Dow Jones' long position.| FSP Technology vs. Wah Lee Industrial | FSP Technology vs. Sinbon Electronics Co | FSP Technology vs. Acbel Polytech | FSP Technology vs. TXC Corp |
| Dow Jones vs. Gentex | Dow Jones vs. American Axle Manufacturing | Dow Jones vs. Pearson PLC ADR | Dow Jones vs. Marine Products |
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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.
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