Correlation Between FIT Holding and Darfon Electronics
Can any of the company-specific risk be diversified away by investing in both FIT Holding and Darfon Electronics 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 FIT Holding and Darfon Electronics into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between FIT Holding Co and Darfon Electronics Corp, you can compare the effects of market volatilities on FIT Holding and Darfon Electronics 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 FIT Holding with a short position of Darfon Electronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of FIT Holding and Darfon Electronics.
Diversification Opportunities for FIT Holding and Darfon Electronics
0.05 | Correlation Coefficient |
Significant diversification
The 3 months correlation between FIT and Darfon is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding FIT Holding Co and Darfon Electronics Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Darfon Electronics Corp and FIT Holding 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 FIT Holding Co are associated (or correlated) with Darfon Electronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Darfon Electronics Corp has no effect on the direction of FIT Holding i.e., FIT Holding and Darfon Electronics go up and down completely randomly.
Pair Corralation between FIT Holding and Darfon Electronics
Assuming the 90 days trading horizon FIT Holding Co is expected to generate 1.38 times more return on investment than Darfon Electronics. However, FIT Holding is 1.38 times more volatile than Darfon Electronics Corp. It trades about 0.13 of its potential returns per unit of risk. Darfon Electronics Corp is currently generating about -0.04 per unit of risk. If you would invest 4,950 in FIT Holding Co on November 6, 2024 and sell it today you would earn a total of 1,140 from holding FIT Holding Co or generate 23.03% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 98.25% |
| Values | Daily Returns |
FIT Holding Co vs. Darfon Electronics Corp
Performance |
| Timeline |
| FIT Holding |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
OK
| Darfon Electronics Corp |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
FIT Holding and Darfon Electronics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with FIT Holding and Darfon Electronics
The main advantage of trading using opposite FIT Holding and Darfon Electronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if FIT Holding position performs unexpectedly, Darfon Electronics 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 Darfon Electronics will offset losses from the drop in Darfon Electronics' long position.The idea behind FIT Holding Co and Darfon Electronics 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.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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.
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