Correlation Between 5E Advanced and FMC
Can any of the company-specific risk be diversified away by investing in both 5E Advanced 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 5E Advanced and FMC into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between 5E Advanced Materials and FMC Corporation, you can compare the effects of market volatilities on 5E Advanced 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 5E Advanced with a short position of FMC. Check out your portfolio center. Please also check ongoing floating volatility patterns of 5E Advanced and FMC.
Diversification Opportunities for 5E Advanced and FMC
-0.22 | Correlation Coefficient |
Very good diversification
The 3 months correlation between FEAM and FMC is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding 5E Advanced Materials and FMC Corp. in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FMC Corporation and 5E Advanced 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 5E Advanced Materials 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 5E Advanced i.e., 5E Advanced and FMC go up and down completely randomly.
Pair Corralation between 5E Advanced and FMC
Given the investment horizon of 90 days 5E Advanced Materials is expected to under-perform the FMC. In addition to that, 5E Advanced is 2.3 times more volatile than FMC Corporation. It trades about -0.02 of its total potential returns per unit of risk. FMC Corporation is currently generating about -0.03 per unit of volatility. If you would invest 5,478 in FMC Corporation on November 9, 2024 and sell it today you would lose (1,912) from holding FMC Corporation or give up 34.9% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
5E Advanced Materials vs. FMC Corp.
Performance |
| Timeline |
| 5E Advanced Materials |
| FMC Corporation |
5E Advanced and FMC Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with 5E Advanced and FMC
The main advantage of trading using opposite 5E Advanced and FMC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if 5E Advanced 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.| 5E Advanced vs. Innospec | 5E Advanced vs. Minerals Technologies | 5E Advanced vs. Oil Dri | 5E Advanced vs. Quaker Chemical |
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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.
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