Correlation Between Embrace Change and FS Credit
Can any of the company-specific risk be diversified away by investing in both Embrace Change and FS Credit 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 Embrace Change and FS Credit into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Embrace Change Acquisition and FS Credit Opportunities, you can compare the effects of market volatilities on Embrace Change and FS Credit 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 Embrace Change with a short position of FS Credit. Check out your portfolio center. Please also check ongoing floating volatility patterns of Embrace Change and FS Credit.
Diversification Opportunities for Embrace Change and FS Credit
-0.38 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Embrace and FSCO is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding Embrace Change Acquisition and FS Credit Opportunities in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FS Credit Opportunities and Embrace Change 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 Embrace Change Acquisition are associated (or correlated) with FS Credit. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FS Credit Opportunities has no effect on the direction of Embrace Change i.e., Embrace Change and FS Credit go up and down completely randomly.
Pair Corralation between Embrace Change and FS Credit
Assuming the 90 days horizon Embrace Change Acquisition is expected to under-perform the FS Credit. But the stock apears to be less risky and, when comparing its historical volatility, Embrace Change Acquisition is 8.46 times less risky than FS Credit. The stock trades about -0.22 of its potential returns per unit of risk. The FS Credit Opportunities is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest 661.00 in FS Credit Opportunities on September 2, 2024 and sell it today you would earn a total of 19.00 from holding FS Credit Opportunities or generate 2.87% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Embrace Change Acquisition vs. FS Credit Opportunities
Performance |
| Timeline |
| Embrace Change Acqui |
| FS Credit Opportunities |
Embrace Change and FS Credit Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Embrace Change and FS Credit
The main advantage of trading using opposite Embrace Change and FS Credit positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Embrace Change position performs unexpectedly, FS Credit 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 FS Credit will offset losses from the drop in FS Credit's long position.The idea behind Embrace Change Acquisition and FS Credit Opportunities 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.| FS Credit vs. MFS Investment Grade | FS Credit vs. Invesco High Income | FS Credit vs. Eaton Vance National | FS Credit vs. Federated Premier Municipal |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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