Correlation Between Federal Signal and Aker Carbon
Can any of the company-specific risk be diversified away by investing in both Federal Signal and Aker Carbon 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 Federal Signal and Aker Carbon into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Federal Signal and Aker Carbon Capture, you can compare the effects of market volatilities on Federal Signal and Aker Carbon 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 Federal Signal with a short position of Aker Carbon. Check out your portfolio center. Please also check ongoing floating volatility patterns of Federal Signal and Aker Carbon.
Diversification Opportunities for Federal Signal and Aker Carbon
-0.2 | Correlation Coefficient |
Good diversification
The 3 months correlation between Federal and Aker is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding Federal Signal and Aker Carbon Capture in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aker Carbon Capture and Federal Signal 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 Federal Signal are associated (or correlated) with Aker Carbon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aker Carbon Capture has no effect on the direction of Federal Signal i.e., Federal Signal and Aker Carbon go up and down completely randomly.
Pair Corralation between Federal Signal and Aker Carbon
Considering the 90-day investment horizon Federal Signal is expected to generate 0.35 times more return on investment than Aker Carbon. However, Federal Signal is 2.87 times less risky than Aker Carbon. It trades about 0.08 of its potential returns per unit of risk. Aker Carbon Capture is currently generating about -0.01 per unit of risk. If you would invest 5,162 in Federal Signal on October 20, 2024 and sell it today you would earn a total of 4,558 from holding Federal Signal or generate 88.3% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 99.6% |
| Values | Daily Returns |
Federal Signal vs. Aker Carbon Capture
Performance |
| Timeline |
| Federal Signal |
| Aker Carbon Capture |
Federal Signal and Aker Carbon Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Federal Signal and Aker Carbon
The main advantage of trading using opposite Federal Signal and Aker Carbon positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Federal Signal position performs unexpectedly, Aker Carbon 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 Aker Carbon will offset losses from the drop in Aker Carbon's long position.| Federal Signal vs. Energy Recovery | Federal Signal vs. CECO Environmental Corp | Federal Signal vs. 374Water Common Stock | Federal Signal vs. CO2 Solutions |
| Aker Carbon vs. CO2 Solutions | Aker Carbon vs. LifeQuest World | Aker Carbon vs. TOMI Environmental Solutions | Aker Carbon vs. Zurn Elkay Water |
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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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