Correlation Between Fm Investments and Bright Rock
Can any of the company-specific risk be diversified away by investing in both Fm Investments and Bright Rock 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 Fm Investments and Bright Rock into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Fm Investments Large and Bright Rock Mid, you can compare the effects of market volatilities on Fm Investments and Bright Rock 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 Fm Investments with a short position of Bright Rock. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fm Investments and Bright Rock.
Diversification Opportunities for Fm Investments and Bright Rock
0.9 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between IAFLX and Bright is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Fm Investments Large and Bright Rock Mid in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bright Rock Mid and Fm Investments 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 Fm Investments Large are associated (or correlated) with Bright Rock. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bright Rock Mid has no effect on the direction of Fm Investments i.e., Fm Investments and Bright Rock go up and down completely randomly.
Pair Corralation between Fm Investments and Bright Rock
Assuming the 90 days horizon Fm Investments Large is expected to generate 1.24 times more return on investment than Bright Rock. However, Fm Investments is 1.24 times more volatile than Bright Rock Mid. It trades about 0.2 of its potential returns per unit of risk. Bright Rock Mid is currently generating about 0.07 per unit of risk. If you would invest 1,879 in Fm Investments Large on September 13, 2024 and sell it today you would earn a total of 63.00 from holding Fm Investments Large or generate 3.35% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 95.45% |
| Values | Daily Returns |
Fm Investments Large vs. Bright Rock Mid
Performance |
| Timeline |
| Fm Investments Large |
| Bright Rock Mid |
Fm Investments and Bright Rock Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Fm Investments and Bright Rock
The main advantage of trading using opposite Fm Investments and Bright Rock positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fm Investments position performs unexpectedly, Bright Rock 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 Bright Rock will offset losses from the drop in Bright Rock's long position.The idea behind Fm Investments Large and Bright Rock Mid 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.| Bright Rock vs. Artisan Global Unconstrained | Bright Rock vs. Siit Global Managed | Bright Rock vs. Commonwealth Global Fund | Bright Rock vs. Morningstar Global Income |
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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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