Correlation Between FMC and Yara International
Can any of the company-specific risk be diversified away by investing in both FMC and Yara International 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 Yara International into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between FMC Corporation and Yara International ASA, you can compare the effects of market volatilities on FMC and Yara International 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 Yara International. Check out your portfolio center. Please also check ongoing floating volatility patterns of FMC and Yara International.
Diversification Opportunities for FMC and Yara International
0.51 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between FMC and Yara is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding FMC Corp. and Yara International ASA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Yara International ASA 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 Yara International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Yara International ASA has no effect on the direction of FMC i.e., FMC and Yara International go up and down completely randomly.
Pair Corralation between FMC and Yara International
Considering the 90-day investment horizon FMC Corporation is expected to under-perform the Yara International. In addition to that, FMC is 1.45 times more volatile than Yara International ASA. It trades about -0.24 of its total potential returns per unit of risk. Yara International ASA is currently generating about -0.23 per unit of volatility. If you would invest 1,523 in Yara International ASA on August 31, 2024 and sell it today you would lose (112.00) from holding Yara International ASA or give up 7.35% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
FMC Corp. vs. Yara International ASA
Performance |
| Timeline |
| FMC Corporation |
| Yara International ASA |
FMC and Yara International Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with FMC and Yara International
The main advantage of trading using opposite FMC and Yara International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if FMC position performs unexpectedly, Yara International 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 Yara International will offset losses from the drop in Yara International's long position.The idea behind FMC Corporation and Yara International ASA 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.| Yara International vs. Nutrien | Yara International vs. Origin Agritech | Yara International vs. American Vanguard | Yara International vs. Scotts Miracle Gro |
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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.
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