Correlation Between FDO INV and FDO DE
Can any of the company-specific risk be diversified away by investing in both FDO INV and FDO DE 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 FDO INV and FDO DE into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between FDO INV CAD and FDO DE INVEST, you can compare the effects of market volatilities on FDO INV and FDO DE 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 FDO INV with a short position of FDO DE. Check out your portfolio center. Please also check ongoing floating volatility patterns of FDO INV and FDO DE.
Diversification Opportunities for FDO INV and FDO DE
Weak diversification
The 3 months correlation between FDO and FDO is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding FDO INV CAD and FDO DE INVEST in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FDO DE INVEST and FDO INV 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 FDO INV CAD are associated (or correlated) with FDO DE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FDO DE INVEST has no effect on the direction of FDO INV i.e., FDO INV and FDO DE go up and down completely randomly.
Pair Corralation between FDO INV and FDO DE
Assuming the 90 days trading horizon FDO INV CAD is expected to generate 2.79 times more return on investment than FDO DE. However, FDO INV is 2.79 times more volatile than FDO DE INVEST. It trades about 0.05 of its potential returns per unit of risk. FDO DE INVEST is currently generating about -0.35 per unit of risk. If you would invest 790.00 in FDO INV CAD on November 3, 2024 and sell it today you would earn a total of 15.00 from holding FDO INV CAD or generate 1.9% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 86.96% |
| Values | Daily Returns |
FDO INV CAD vs. FDO DE INVEST
Performance |
| Timeline |
| FDO INV CAD |
| FDO DE INVEST |
FDO INV and FDO DE Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with FDO INV and FDO DE
The main advantage of trading using opposite FDO INV and FDO DE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if FDO INV position performs unexpectedly, FDO DE 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 FDO DE will offset losses from the drop in FDO DE's long position.The idea behind FDO INV CAD and FDO DE INVEST 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.| FDO DE vs. Energisa SA | FDO DE vs. BTG Pactual Logstica | FDO DE vs. Plano Plano Desenvolvimento | FDO DE vs. Ares Management |
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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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