Correlation Between United Guardian and Fenbo Holdings
Can any of the company-specific risk be diversified away by investing in both United Guardian and Fenbo Holdings 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 United Guardian and Fenbo Holdings into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between United Guardian and Fenbo Holdings Limited, you can compare the effects of market volatilities on United Guardian and Fenbo Holdings 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 United Guardian with a short position of Fenbo Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of United Guardian and Fenbo Holdings.
Diversification Opportunities for United Guardian and Fenbo Holdings
0.74 | Correlation Coefficient |
Poor diversification
The 3 months correlation between United and Fenbo is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding United Guardian and Fenbo Holdings Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fenbo Holdings and United Guardian 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 United Guardian are associated (or correlated) with Fenbo Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fenbo Holdings has no effect on the direction of United Guardian i.e., United Guardian and Fenbo Holdings go up and down completely randomly.
Pair Corralation between United Guardian and Fenbo Holdings
Allowing for the 90-day total investment horizon United Guardian is expected to generate 0.47 times more return on investment than Fenbo Holdings. However, United Guardian is 2.14 times less risky than Fenbo Holdings. It trades about -0.43 of its potential returns per unit of risk. Fenbo Holdings Limited is currently generating about -0.38 per unit of risk. If you would invest 1,358 in United Guardian on August 27, 2024 and sell it today you would lose (383.00) from holding United Guardian or give up 28.2% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
United Guardian vs. Fenbo Holdings Limited
Performance |
| Timeline |
| United Guardian |
| Fenbo Holdings |
United Guardian and Fenbo Holdings Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with United Guardian and Fenbo Holdings
The main advantage of trading using opposite United Guardian and Fenbo Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if United Guardian position performs unexpectedly, Fenbo Holdings 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 Fenbo Holdings will offset losses from the drop in Fenbo Holdings' long position.| United Guardian vs. Utah Medical Products | United Guardian vs. Union Bankshares | United Guardian vs. Psychemedics | United Guardian vs. Unity Bancorp |
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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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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