Correlation Between FKX and Highstreet
Can any of the company-specific risk be diversified away by investing in both FKX and Highstreet 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 FKX and Highstreet into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between FKX and Highstreet, you can compare the effects of market volatilities on FKX and Highstreet 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 FKX with a short position of Highstreet. Check out your portfolio center. Please also check ongoing floating volatility patterns of FKX and Highstreet.
Diversification Opportunities for FKX and Highstreet
0.52 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between FKX and Highstreet is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding FKX and Highstreet in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Highstreet and FKX 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 FKX are associated (or correlated) with Highstreet. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Highstreet has no effect on the direction of FKX i.e., FKX and Highstreet go up and down completely randomly.
Pair Corralation between FKX and Highstreet
Assuming the 90 days trading horizon FKX is expected to generate 0.85 times more return on investment than Highstreet. However, FKX is 1.17 times less risky than Highstreet. It trades about 0.3 of its potential returns per unit of risk. Highstreet is currently generating about 0.25 per unit of risk. If you would invest 0.07 in FKX on August 28, 2024 and sell it today you would earn a total of 0.02 from holding FKX or generate 29.31% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
FKX vs. Highstreet
Performance |
| Timeline |
| FKX |
| Highstreet |
FKX and Highstreet Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with FKX and Highstreet
The main advantage of trading using opposite FKX and Highstreet positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if FKX position performs unexpectedly, Highstreet 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 Highstreet will offset losses from the drop in Highstreet's long position.The idea behind FKX and Highstreet 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.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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.
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