Correlation Between Firsthand Technology and Global Technology
Can any of the company-specific risk be diversified away by investing in both Firsthand Technology and Global Technology 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 Firsthand Technology and Global Technology into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Firsthand Technology Opportunities and Global Technology Portfolio, you can compare the effects of market volatilities on Firsthand Technology and Global Technology 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 Firsthand Technology with a short position of Global Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of Firsthand Technology and Global Technology.
Diversification Opportunities for Firsthand Technology and Global Technology
0.9 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Firsthand and Global is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Firsthand Technology Opportuni and Global Technology Portfolio in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global Technology and Firsthand Technology 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 Firsthand Technology Opportunities are associated (or correlated) with Global Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Global Technology has no effect on the direction of Firsthand Technology i.e., Firsthand Technology and Global Technology go up and down completely randomly.
Pair Corralation between Firsthand Technology and Global Technology
Assuming the 90 days horizon Firsthand Technology Opportunities is expected to under-perform the Global Technology. In addition to that, Firsthand Technology is 1.34 times more volatile than Global Technology Portfolio. It trades about 0.0 of its total potential returns per unit of risk. Global Technology Portfolio is currently generating about 0.12 per unit of volatility. If you would invest 1,385 in Global Technology Portfolio on August 25, 2024 and sell it today you would earn a total of 731.00 from holding Global Technology Portfolio or generate 52.78% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Firsthand Technology Opportuni vs. Global Technology Portfolio
Performance |
| Timeline |
| Firsthand Technology |
| Global Technology |
Firsthand Technology and Global Technology Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Firsthand Technology and Global Technology
The main advantage of trading using opposite Firsthand Technology and Global Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Firsthand Technology position performs unexpectedly, Global Technology 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 Global Technology will offset losses from the drop in Global Technology's long position.The idea behind Firsthand Technology Opportunities and Global Technology Portfolio 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.
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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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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