Correlation Between Auto Trader and FMC Corp
Can any of the company-specific risk be diversified away by investing in both Auto Trader and FMC Corp 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 Auto Trader and FMC Corp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Auto Trader Group and FMC Corp, you can compare the effects of market volatilities on Auto Trader and FMC Corp 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 Auto Trader with a short position of FMC Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Auto Trader and FMC Corp.
Diversification Opportunities for Auto Trader and FMC Corp
0.71 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Auto and FMC is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Auto Trader Group and FMC Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FMC Corp and Auto Trader 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 Auto Trader Group are associated (or correlated) with FMC Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FMC Corp has no effect on the direction of Auto Trader i.e., Auto Trader and FMC Corp go up and down completely randomly.
Pair Corralation between Auto Trader and FMC Corp
Assuming the 90 days trading horizon Auto Trader Group is expected to generate 0.63 times more return on investment than FMC Corp. However, Auto Trader Group is 1.59 times less risky than FMC Corp. It trades about -0.05 of its potential returns per unit of risk. FMC Corp is currently generating about -0.06 per unit of risk. If you would invest 87,700 in Auto Trader Group on September 2, 2024 and sell it today you would lose (3,800) from holding Auto Trader Group or give up 4.33% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Auto Trader Group vs. FMC Corp
Performance |
| Timeline |
| Auto Trader Group |
| FMC Corp |
Auto Trader and FMC Corp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Auto Trader and FMC Corp
The main advantage of trading using opposite Auto Trader and FMC Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Auto Trader position performs unexpectedly, FMC Corp 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 FMC Corp will offset losses from the drop in FMC Corp's long position.| Auto Trader vs. Catalyst Media Group | Auto Trader vs. Tamburi Investment Partners | Auto Trader vs. Magnora ASA | Auto Trader vs. RTW Venture Fund |
| FMC Corp vs. Uniper SE | FMC Corp vs. Mulberry Group PLC | FMC Corp vs. London Security Plc | FMC Corp vs. Triad Group PLC |
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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.
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