Correlation Between Federal Signal and One World
Can any of the company-specific risk be diversified away by investing in both Federal Signal and One World 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 One World into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Federal Signal and One World Universe, you can compare the effects of market volatilities on Federal Signal and One World 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 One World. Check out your portfolio center. Please also check ongoing floating volatility patterns of Federal Signal and One World.
Diversification Opportunities for Federal Signal and One World
-0.19 | Correlation Coefficient |
Good diversification
The 3 months correlation between Federal and One is -0.19. Overlapping area represents the amount of risk that can be diversified away by holding Federal Signal and One World Universe in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on One World Universe 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 One World. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of One World Universe has no effect on the direction of Federal Signal i.e., Federal Signal and One World go up and down completely randomly.
Pair Corralation between Federal Signal and One World
Considering the 90-day investment horizon Federal Signal is expected to generate 0.2 times more return on investment than One World. However, Federal Signal is 4.88 times less risky than One World. It trades about 0.28 of its potential returns per unit of risk. One World Universe is currently generating about 0.01 per unit of risk. If you would invest 8,564 in Federal Signal on August 29, 2024 and sell it today you would earn a total of 1,208 from holding Federal Signal or generate 14.11% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Federal Signal vs. One World Universe
Performance |
| Timeline |
| Federal Signal |
| One World Universe |
Federal Signal and One World Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Federal Signal and One World
The main advantage of trading using opposite Federal Signal and One World positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Federal Signal position performs unexpectedly, One World 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 One World will offset losses from the drop in One World'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 |
| One World vs. Veralto | One World vs. China Conch Venture | One World vs. Umicore SA ADR | One World vs. Umicore SA |
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 Anywhere module to track or share privately all of your investments from the convenience of any device.
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