Correlation Between Fenbo Holdings and Escalade Incorporated

Can any of the company-specific risk be diversified away by investing in both Fenbo Holdings and Escalade Incorporated 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 Fenbo Holdings and Escalade Incorporated into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Fenbo Holdings Limited and Escalade Incorporated, you can compare the effects of market volatilities on Fenbo Holdings and Escalade Incorporated 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 Fenbo Holdings with a short position of Escalade Incorporated. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fenbo Holdings and Escalade Incorporated.

Diversification Opportunities for Fenbo Holdings and Escalade Incorporated

-0.01

Correlation Coefficient

Fenbo Holdings  Escalade Incorporated

Good diversification

The 3 months correlation between Fenbo and Escalade is -0.01. Overlapping area represents the amount of risk that can be diversified away by holding Fenbo Holdings Limited and Escalade Incorporated in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Escalade Incorporated and Fenbo Holdings 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 Fenbo Holdings Limited are associated (or correlated) with Escalade Incorporated. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Escalade Incorporated has no effect on the direction of Fenbo Holdings i.e., Fenbo Holdings and Escalade Incorporated go up and down completely randomly.

Pair Corralation between Fenbo Holdings and Escalade Incorporated

Given the investment horizon of 90 days Fenbo Holdings Limited is expected to generate 2.01 times more return on investment than Escalade Incorporated. However, Fenbo Holdings is 2.01 times more volatile than Escalade Incorporated. It trades about 0.07 of its potential returns per unit of risk. Escalade Incorporated is currently generating about -0.01 per unit of risk. If you would invest  889.00  in Fenbo Holdings Limited on March 7, 2024 and sell it today you would earn a total of  144.00  from holding Fenbo Holdings Limited or generate 16.2% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.41%
Values	Daily Returns

Fenbo Holdings Limited  vs.  Escalade Incorporated

Fenbo Holdings

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Fenbo Holdings Limited are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very weak fundamental drivers, Fenbo Holdings displayed solid returns over the last few months and may actually be approaching a breakup point.

Escalade Incorporated

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Escalade Incorporated has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong fundamental indicators, Escalade Incorporated is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Fenbo Holdings and Escalade Incorporated

The main advantage of trading using opposite Fenbo Holdings and Escalade Incorporated positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fenbo Holdings position performs unexpectedly, Escalade Incorporated 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 Escalade Incorporated will offset losses from the drop in Escalade Incorporated's long position.

The idea behind Fenbo Holdings Limited and Escalade Incorporated 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.

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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.