Correlation Between FC Investment and Centrica PLC
Can any of the company-specific risk be diversified away by investing in both FC Investment and Centrica PLC 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 Centrica PLC 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 Centrica PLC, you can compare the effects of market volatilities on FC Investment and Centrica PLC 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 Centrica PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of FC Investment and Centrica PLC.
Diversification Opportunities for FC Investment and Centrica PLC
0.71 | Correlation Coefficient |
Poor diversification
The 3 months correlation between FCIT and Centrica is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding FC Investment Trust and Centrica PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Centrica PLC 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 Centrica PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Centrica PLC has no effect on the direction of FC Investment i.e., FC Investment and Centrica PLC go up and down completely randomly.
Pair Corralation between FC Investment and Centrica PLC
Assuming the 90 days trading horizon FC Investment Trust is expected to generate 0.54 times more return on investment than Centrica PLC. However, FC Investment Trust is 1.84 times less risky than Centrica PLC. It trades about 0.23 of its potential returns per unit of risk. Centrica PLC is currently generating about 0.11 per unit of risk. If you would invest 105,600 in FC Investment Trust on September 13, 2024 and sell it today you would earn a total of 7,600 from holding FC Investment Trust or generate 7.2% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
FC Investment Trust vs. Centrica PLC
Performance |
| Timeline |
| FC Investment Trust |
| Centrica PLC |
FC Investment and Centrica PLC Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with FC Investment and Centrica PLC
The main advantage of trading using opposite FC Investment and Centrica PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if FC Investment position performs unexpectedly, Centrica PLC 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 Centrica PLC will offset losses from the drop in Centrica PLC's long position.| FC Investment vs. Allianz Technology Trust | FC Investment vs. Public Storage | FC Investment vs. Ion Beam Applications | FC Investment vs. Check Point Software |
| Centrica PLC vs. Indutrade AB | Centrica PLC vs. Various Eateries PLC | Centrica PLC vs. Supermarket Income REIT | Centrica PLC vs. Ecclesiastical Insurance Office |
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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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