Correlation Between Huntsman Exploration and Fortescue Metals
Can any of the company-specific risk be diversified away by investing in both Huntsman Exploration and Fortescue Metals 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 Huntsman Exploration and Fortescue Metals into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Huntsman Exploration and Fortescue Metals Group, you can compare the effects of market volatilities on Huntsman Exploration and Fortescue Metals 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 Huntsman Exploration with a short position of Fortescue Metals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Huntsman Exploration and Fortescue Metals.
Diversification Opportunities for Huntsman Exploration and Fortescue Metals
0.76 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Huntsman and Fortescue is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Huntsman Exploration and Fortescue Metals Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fortescue Metals and Huntsman Exploration 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 Huntsman Exploration are associated (or correlated) with Fortescue Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fortescue Metals has no effect on the direction of Huntsman Exploration i.e., Huntsman Exploration and Fortescue Metals go up and down completely randomly.
Pair Corralation between Huntsman Exploration and Fortescue Metals
Assuming the 90 days horizon Huntsman Exploration is expected to under-perform the Fortescue Metals. In addition to that, Huntsman Exploration is 5.17 times more volatile than Fortescue Metals Group. It trades about -0.22 of its total potential returns per unit of risk. Fortescue Metals Group is currently generating about -0.04 per unit of volatility. If you would invest 1,254 in Fortescue Metals Group on September 1, 2024 and sell it today you would lose (34.00) from holding Fortescue Metals Group or give up 2.71% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Huntsman Exploration vs. Fortescue Metals Group
Performance |
| Timeline |
| Huntsman Exploration |
| Fortescue Metals |
Huntsman Exploration and Fortescue Metals Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Huntsman Exploration and Fortescue Metals
The main advantage of trading using opposite Huntsman Exploration and Fortescue Metals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Huntsman Exploration position performs unexpectedly, Fortescue Metals 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 Fortescue Metals will offset losses from the drop in Fortescue Metals' long position.| Huntsman Exploration vs. Aurelia Metals Limited | Huntsman Exploration vs. Adriatic Metals PLC | Huntsman Exploration vs. American Helium | Huntsman Exploration vs. Progressive Planet Solutions |
| Fortescue Metals vs. IGO Limited | Fortescue Metals vs. Qubec Nickel Corp | Fortescue Metals vs. Nickel Mines Limited | Fortescue Metals vs. Mineral Resources Limited |
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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
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