Correlation Between FC Investment and Baker Steel
Can any of the company-specific risk be diversified away by investing in both FC Investment and Baker Steel 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 FC Investment and Baker Steel into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between FC Investment Trust and Baker Steel Resources, you can compare the effects of market volatilities on FC Investment and Baker Steel 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 FC Investment with a short position of Baker Steel. Check out your portfolio center. Please also check ongoing floating volatility patterns of FC Investment and Baker Steel.
Diversification Opportunities for FC Investment and Baker Steel
0.61 | Correlation Coefficient |
Poor diversification
The 3 months correlation between FCIT and Baker is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding FC Investment Trust and Baker Steel Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Baker Steel Resources and FC Investment 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 FC Investment Trust are associated (or correlated) with Baker Steel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Baker Steel Resources has no effect on the direction of FC Investment i.e., FC Investment and Baker Steel go up and down completely randomly.
Pair Corralation between FC Investment and Baker Steel
Assuming the 90 days trading horizon FC Investment is expected to generate 2.26 times less return on investment than Baker Steel. But when comparing it to its historical volatility, FC Investment Trust is 4.51 times less risky than Baker Steel. It trades about 0.06 of its potential returns per unit of risk. Baker Steel Resources is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 4,475 in Baker Steel Resources on September 4, 2024 and sell it today you would earn a total of 1,325 from holding Baker Steel Resources or generate 29.61% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 99.4% |
| Values | Daily Returns |
FC Investment Trust vs. Baker Steel Resources
Performance |
| Timeline |
| FC Investment Trust |
| Baker Steel Resources |
FC Investment and Baker Steel Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with FC Investment and Baker Steel
The main advantage of trading using opposite FC Investment and Baker Steel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if FC Investment position performs unexpectedly, Baker Steel 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 Baker Steel will offset losses from the drop in Baker Steel's long position.| FC Investment vs. SupplyMe Capital PLC | FC Investment vs. Lloyds Banking Group | FC Investment vs. Premier African Minerals | FC Investment vs. SANTANDER UK 8 |
| Baker Steel vs. Future Metals NL | Baker Steel vs. JD Sports Fashion | Baker Steel vs. Zoom Video Communications | Baker Steel vs. Golden Metal Resources |
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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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