Correlation Between Fair Oaks and Polar Capital
Can any of the company-specific risk be diversified away by investing in both Fair Oaks and Polar Capital 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 Fair Oaks and Polar Capital into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Fair Oaks Income and Polar Capital Technology, you can compare the effects of market volatilities on Fair Oaks and Polar Capital 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 Fair Oaks with a short position of Polar Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fair Oaks and Polar Capital.
Diversification Opportunities for Fair Oaks and Polar Capital
0.75 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Fair and Polar is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Fair Oaks Income and Polar Capital Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Polar Capital Technology and Fair Oaks 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 Fair Oaks Income are associated (or correlated) with Polar Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Polar Capital Technology has no effect on the direction of Fair Oaks i.e., Fair Oaks and Polar Capital go up and down completely randomly.
Pair Corralation between Fair Oaks and Polar Capital
Assuming the 90 days trading horizon Fair Oaks is expected to generate 2.82 times less return on investment than Polar Capital. But when comparing it to its historical volatility, Fair Oaks Income is 2.93 times less risky than Polar Capital. It trades about 0.12 of its potential returns per unit of risk. Polar Capital Technology is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest 25,400 in Polar Capital Technology on October 27, 2024 and sell it today you would earn a total of 12,850 from holding Polar Capital Technology or generate 50.59% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Fair Oaks Income vs. Polar Capital Technology
Performance |
| Timeline |
| Fair Oaks Income |
| Polar Capital Technology |
Fair Oaks and Polar Capital Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Fair Oaks and Polar Capital
The main advantage of trading using opposite Fair Oaks and Polar Capital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fair Oaks position performs unexpectedly, Polar Capital 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 Polar Capital will offset losses from the drop in Polar Capital's long position.| Fair Oaks vs. Empire Metals Limited | Fair Oaks vs. Take Two Interactive Software | Fair Oaks vs. URU Metals | Fair Oaks vs. DXC Technology Co |
| Polar Capital vs. Clean Power Hydrogen | Polar Capital vs. European Metals Holdings | Polar Capital vs. Silvercorp Metals | Polar Capital vs. Capital Metals PLC |
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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..
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