Correlation Between FG Acquisition and Western Resources
Can any of the company-specific risk be diversified away by investing in both FG Acquisition and Western Resources 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 FG Acquisition and Western Resources into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between FG Acquisition Corp and Western Resources Corp, you can compare the effects of market volatilities on FG Acquisition and Western Resources 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 FG Acquisition with a short position of Western Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of FG Acquisition and Western Resources.
Diversification Opportunities for FG Acquisition and Western Resources
0.35 | Correlation Coefficient |
Weak diversification
The 3 months correlation between FGAA-U and Western is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding FG Acquisition Corp and Western Resources Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Western Resources Corp and FG Acquisition 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 FG Acquisition Corp are associated (or correlated) with Western Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Western Resources Corp has no effect on the direction of FG Acquisition i.e., FG Acquisition and Western Resources go up and down completely randomly.
Pair Corralation between FG Acquisition and Western Resources
Assuming the 90 days trading horizon FG Acquisition is expected to generate 11.94 times less return on investment than Western Resources. But when comparing it to its historical volatility, FG Acquisition Corp is 19.51 times less risky than Western Resources. It trades about 0.2 of its potential returns per unit of risk. Western Resources Corp is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest 4.00 in Western Resources Corp on August 31, 2024 and sell it today you would earn a total of 2.00 from holding Western Resources Corp or generate 50.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
FG Acquisition Corp vs. Western Resources Corp
Performance |
| Timeline |
| FG Acquisition Corp |
| Western Resources Corp |
FG Acquisition and Western Resources Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with FG Acquisition and Western Resources
The main advantage of trading using opposite FG Acquisition and Western Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if FG Acquisition position performs unexpectedly, Western Resources 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 Western Resources will offset losses from the drop in Western Resources' long position.| FG Acquisition vs. North American Financial | FG Acquisition vs. Converge Technology Solutions | FG Acquisition vs. Verizon Communications CDR | FG Acquisition vs. Financial 15 Split |
| Western Resources vs. Gensource Potash | Western Resources vs. Century Global Commodities | Western Resources vs. Xtra Gold Resources Corp | Western Resources vs. Loncor 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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