Correlation Between FP Newspapers and Aclara Resources

Can any of the company-specific risk be diversified away by investing in both FP Newspapers and Aclara Resources 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 FP Newspapers and Aclara Resources into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between FP Newspapers and Aclara Resources, you can compare the effects of market volatilities on FP Newspapers and Aclara Resources 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 FP Newspapers with a short position of Aclara Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of FP Newspapers and Aclara Resources.

Diversification Opportunities for FP Newspapers and Aclara Resources

-0.66

Correlation Coefficient

FP Newspapers  Aclara Resources

Excellent diversification

The 3 months correlation between FP Newspapers and Aclara is -0.66. Overlapping area represents the amount of risk that can be diversified away by holding FP Newspapers and Aclara Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aclara Resources and FP Newspapers 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 FP Newspapers are associated (or correlated) with Aclara Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aclara Resources has no effect on the direction of FP Newspapers i.e., FP Newspapers and Aclara Resources go up and down completely randomly.

Pair Corralation between FP Newspapers and Aclara Resources

Given the investment horizon of 90 days FP Newspapers is expected to under-perform the Aclara Resources. But the stock apears to be less risky and, when comparing its historical volatility, FP Newspapers is 2.09 times less risky than Aclara Resources. The stock trades about -0.08 of its potential returns per unit of risk. The Aclara Resources is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  44.00  in Aclara Resources on February 22, 2024 and sell it today you would earn a total of  11.00  from holding Aclara Resources or generate 25.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

FP Newspapers  vs.  Aclara Resources

FP Newspapers

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days FP Newspapers has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in June 2024. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Aclara Resources

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Aclara Resources are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady basic indicators, Aclara Resources displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with FP Newspapers and Aclara Resources

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

The idea behind FP Newspapers and Aclara Resources 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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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.