Correlation Between Corteva and FMC
Can any of the company-specific risk be diversified away by investing in both Corteva and FMC 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 Corteva and FMC into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Corteva and FMC Corporation, you can compare the effects of market volatilities on Corteva and FMC 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 Corteva with a short position of FMC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Corteva and FMC.
Diversification Opportunities for Corteva and FMC
Significant diversification
The 3 months correlation between Corteva and FMC is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Corteva and FMC Corp. in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FMC Corporation and Corteva 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 Corteva are associated (or correlated) with FMC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FMC Corporation has no effect on the direction of Corteva i.e., Corteva and FMC go up and down completely randomly.
Pair Corralation between Corteva and FMC
Given the investment horizon of 90 days Corteva is expected to generate 0.62 times more return on investment than FMC. However, Corteva is 1.6 times less risky than FMC. It trades about 0.01 of its potential returns per unit of risk. FMC Corporation is currently generating about -0.05 per unit of risk. If you would invest 6,113 in Corteva on August 27, 2024 and sell it today you would earn a total of 10.00 from holding Corteva or generate 0.16% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Corteva vs. FMC Corp.
Performance |
| Timeline |
| Corteva |
| FMC Corporation |
Corteva and FMC Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Corteva and FMC
The main advantage of trading using opposite Corteva and FMC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Corteva position performs unexpectedly, FMC 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 will offset losses from the drop in FMC's long position.| Corteva vs. CF Industries Holdings | Corteva vs. American Vanguard | Corteva vs. Intrepid Potash | Corteva vs. The Mosaic |
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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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