Correlation Between First and Young Cos
Can any of the company-specific risk be diversified away by investing in both First and Young Cos 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 First and Young Cos into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between First Class Metals and Young Cos Brewery, you can compare the effects of market volatilities on First and Young Cos 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 First with a short position of Young Cos. Check out your portfolio center. Please also check ongoing floating volatility patterns of First and Young Cos.
Diversification Opportunities for First and Young Cos
Weak diversification
The 3 months correlation between First and Young is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding First Class Metals and Young Cos Brewery in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Young Cos Brewery and First 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 First Class Metals are associated (or correlated) with Young Cos. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Young Cos Brewery has no effect on the direction of First i.e., First and Young Cos go up and down completely randomly.
Pair Corralation between First and Young Cos
Assuming the 90 days trading horizon First Class Metals is expected to under-perform the Young Cos. In addition to that, First is 1.9 times more volatile than Young Cos Brewery. It trades about -0.31 of its total potential returns per unit of risk. Young Cos Brewery is currently generating about -0.14 per unit of volatility. If you would invest 62,600 in Young Cos Brewery on October 16, 2024 and sell it today you would lose (3,400) from holding Young Cos Brewery or give up 5.43% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
First Class Metals vs. Young Cos Brewery
Performance |
| Timeline |
| First Class Metals |
| Young Cos Brewery |
First and Young Cos Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First and Young Cos
The main advantage of trading using opposite First and Young Cos positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First position performs unexpectedly, Young Cos 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 Young Cos will offset losses from the drop in Young Cos' long position.| First vs. Ecclesiastical Insurance Office | First vs. SMA Solar Technology | First vs. Alfa Financial Software | First vs. International Biotechnology Trust |
| Young Cos vs. Jupiter Fund Management | Young Cos vs. Litigation Capital Management | Young Cos vs. Liontrust Asset Management | Young Cos vs. Chrysalis Investments |
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 Commodity Directory module to find actively traded commodities issued by global exchanges.
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