Correlation Between Fonar and Absolute Capital

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Can any of the company-specific risk be diversified away by investing in both Fonar and Absolute Capital 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 Fonar and Absolute Capital into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Fonar and Absolute Capital Defender, you can compare the effects of market volatilities on Fonar and Absolute Capital 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 Fonar with a short position of Absolute Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fonar and Absolute Capital.

Diversification Opportunities for Fonar and Absolute Capital

0.81
  Correlation Coefficient

Very poor diversification

The 3 months correlation between Fonar and Absolute is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Fonar and ABSOLUTE CAPITAL DEFENDER in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Absolute Capital Defender and Fonar 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 Fonar are associated (or correlated) with Absolute Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Absolute Capital Defender has no effect on the direction of Fonar i.e., Fonar and Absolute Capital go up and down completely randomly.

Pair Corralation between Fonar and Absolute Capital

Given the investment horizon of 90 days Fonar is expected to generate 6.17 times more return on investment than Absolute Capital. However, Fonar is 6.17 times more volatile than Absolute Capital Defender. It trades about 0.12 of its potential returns per unit of risk. Absolute Capital Defender is currently generating about 0.22 per unit of risk. If you would invest  1,976  in Fonar on December 29, 2023 and sell it today you would earn a total of  203.00  from holding Fonar or generate 10.27% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy100.0%
ValuesDaily Returns

Fonar  vs.  ABSOLUTE CAPITAL DEFENDER

 Performance 
       Timeline  
Fonar 

Risk-Adjusted Performance

7 of 100

 
Low
 
High
Modest
Compared to the overall equity markets, risk-adjusted returns on investments in Fonar are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Even with relatively abnormal basic indicators, Fonar may actually be approaching a critical reversion point that can send shares even higher in April 2024.
Absolute Capital Defender 

Risk-Adjusted Performance

16 of 100

 
Low
 
High
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Absolute Capital Defender are ranked lower than 16 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, Absolute Capital is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Fonar and Absolute Capital Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Fonar and Absolute Capital

The main advantage of trading using opposite Fonar and Absolute Capital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fonar position performs unexpectedly, Absolute Capital 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 Absolute Capital will offset losses from the drop in Absolute Capital's long position.
The idea behind Fonar and Absolute Capital Defender 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.

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