Correlation Between FORTEC Elektronik and China Communications
Can any of the company-specific risk be diversified away by investing in both FORTEC Elektronik and China Communications 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 FORTEC Elektronik and China Communications into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between FORTEC Elektronik AG and China Communications Services, you can compare the effects of market volatilities on FORTEC Elektronik and China Communications 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 FORTEC Elektronik with a short position of China Communications. Check out your portfolio center. Please also check ongoing floating volatility patterns of FORTEC Elektronik and China Communications.
Diversification Opportunities for FORTEC Elektronik and China Communications
0.02 | Correlation Coefficient |
Significant diversification
The 3 months correlation between FORTEC and China is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding FORTEC Elektronik AG and China Communications Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Communications and FORTEC Elektronik 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 FORTEC Elektronik AG are associated (or correlated) with China Communications. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Communications has no effect on the direction of FORTEC Elektronik i.e., FORTEC Elektronik and China Communications go up and down completely randomly.
Pair Corralation between FORTEC Elektronik and China Communications
Assuming the 90 days trading horizon FORTEC Elektronik AG is expected to generate 1.38 times more return on investment than China Communications. However, FORTEC Elektronik is 1.38 times more volatile than China Communications Services. It trades about 0.08 of its potential returns per unit of risk. China Communications Services is currently generating about -0.07 per unit of risk. If you would invest 1,950 in FORTEC Elektronik AG on October 16, 2024 and sell it today you would earn a total of 50.00 from holding FORTEC Elektronik AG or generate 2.56% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
FORTEC Elektronik AG vs. China Communications Services
Performance |
| Timeline |
| FORTEC Elektronik |
| China Communications |
FORTEC Elektronik and China Communications Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with FORTEC Elektronik and China Communications
The main advantage of trading using opposite FORTEC Elektronik and China Communications positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if FORTEC Elektronik position performs unexpectedly, China Communications 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 China Communications will offset losses from the drop in China Communications' long position.The idea behind FORTEC Elektronik AG and China Communications Services 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.
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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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.
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