Correlation Between Fidelity National and Formula Systems

Can any of the company-specific risk be diversified away by investing in both Fidelity National and Formula Systems 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 Fidelity National and Formula Systems into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Fidelity National Information and Formula Systems 1985, you can compare the effects of market volatilities on Fidelity National and Formula Systems 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 Fidelity National with a short position of Formula Systems. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fidelity National and Formula Systems.

Diversification Opportunities for Fidelity National and Formula Systems

0.8

Correlation Coefficient

Fidelity National  Formula Systems

Very poor diversification

The 3 months correlation between Fidelity and Formula is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Fidelity National Information and Formula Systems 1985 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Formula Systems 1985 and Fidelity National 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 Fidelity National Information are associated (or correlated) with Formula Systems. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Formula Systems 1985 has no effect on the direction of Fidelity National i.e., Fidelity National and Formula Systems go up and down completely randomly.

Pair Corralation between Fidelity National and Formula Systems

Considering the 90-day investment horizon Fidelity National Information is expected to generate 0.72 times more return on investment than Formula Systems. However, Fidelity National Information is 1.39 times less risky than Formula Systems. It trades about 0.24 of its potential returns per unit of risk. Formula Systems 1985 is currently generating about 0.1 per unit of risk. If you would invest  6,264  in Fidelity National Information on February 20, 2024 and sell it today you would earn a total of  1,572  from holding Fidelity National Information or generate 25.1% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.46%
Values	Daily Returns

Fidelity National Information  vs.  Formula Systems 1985

Fidelity National

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Fidelity National Information are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak forward indicators, Fidelity National unveiled solid returns over the last few months and may actually be approaching a breakup point.

Formula Systems 1985

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Formula Systems 1985 are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating basic indicators, Formula Systems may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Pair Trading with Fidelity National and Formula Systems

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

The idea behind Fidelity National Information and Formula Systems 1985 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.