Correlation Between FOS Capital and Deep Yellow

Can any of the company-specific risk be diversified away by investing in both FOS Capital and Deep Yellow 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 FOS Capital and Deep Yellow into the same portfolio, which is an essential part of the fundamental portfolio management process.

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

Diversification Opportunities for FOS Capital and Deep Yellow

0.32

Correlation Coefficient

FOS Capital  Deep Yellow

Weak diversification

The 3 months correlation between FOS and Deep is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding FOS Capital and Deep Yellow in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Deep Yellow and FOS Capital 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 FOS Capital are associated (or correlated) with Deep Yellow. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Deep Yellow has no effect on the direction of FOS Capital i.e., FOS Capital and Deep Yellow go up and down completely randomly.

Pair Corralation between FOS Capital and Deep Yellow

Assuming the 90 days trading horizon FOS Capital is expected to generate 12.31 times less return on investment than Deep Yellow. But when comparing it to its historical volatility, FOS Capital is 1.41 times less risky than Deep Yellow. It trades about 0.03 of its potential returns per unit of risk. Deep Yellow is currently generating about 0.28 of returns per unit of risk over similar time horizon. If you would invest  84.00  in Deep Yellow on April 20, 2025 and sell it today you would earn a total of  98.00  from holding Deep Yellow or generate 116.67% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.41%
Values	Daily Returns

FOS Capital  vs.  Deep Yellow

FOS Capital

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in FOS Capital are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, FOS Capital may actually be approaching a critical reversion point that can send shares even higher in August 2025.

Deep Yellow

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Deep Yellow are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain essential indicators, Deep Yellow unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with FOS Capital and Deep Yellow

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

The idea behind FOS Capital and Deep Yellow 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.