Correlation Between FMC and E I
Can any of the company-specific risk be diversified away by investing in both FMC and E I 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 FMC and E I into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between FMC Corporation and E I du, you can compare the effects of market volatilities on FMC and E I 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 FMC with a short position of E I. Check out your portfolio center. Please also check ongoing floating volatility patterns of FMC and E I.
Diversification Opportunities for FMC and E I
Poor diversification
The 3 months correlation between FMC and CTA-PA is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding FMC Corp. and E I du in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on E I du and FMC 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 FMC Corporation are associated (or correlated) with E I. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of E I du has no effect on the direction of FMC i.e., FMC and E I go up and down completely randomly.
Pair Corralation between FMC and E I
Considering the 90-day investment horizon FMC Corporation is expected to generate 1.77 times more return on investment than E I. However, FMC is 1.77 times more volatile than E I du. It trades about 0.01 of its potential returns per unit of risk. E I du is currently generating about -0.01 per unit of risk. If you would invest 6,018 in FMC Corporation on August 30, 2024 and sell it today you would lose (21.00) from holding FMC Corporation or give up 0.35% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.65% |
| Values | Daily Returns |
FMC Corp. vs. E I du
Performance |
| Timeline |
| FMC Corporation |
| E I du |
FMC and E I Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with FMC and E I
The main advantage of trading using opposite FMC and E I positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if FMC position performs unexpectedly, E I 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 E I will offset losses from the drop in E I's long position.The idea behind FMC Corporation and E I du 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.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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
Other Complementary Tools
| Fundamentals Comparison Compare fundamentals across multiple equities to find investing opportunities | |
| Stocks Directory Find actively traded stocks across global markets | |
| Equity Forecasting Use basic forecasting models to generate price predictions and determine price momentum | |
| Options Analysis Analyze and evaluate options and option chains as a potential hedge for your portfolios | |
| Stock Tickers Use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites |