Correlation Between Fortescue Metals and Materion
Can any of the company-specific risk be diversified away by investing in both Fortescue Metals and Materion 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 Fortescue Metals and Materion into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Fortescue Metals Group and Materion, you can compare the effects of market volatilities on Fortescue Metals and Materion 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 Fortescue Metals with a short position of Materion. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fortescue Metals and Materion.
Diversification Opportunities for Fortescue Metals and Materion
-0.22 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Fortescue and Materion is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding Fortescue Metals Group and Materion in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Materion and Fortescue Metals 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 Fortescue Metals Group are associated (or correlated) with Materion. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Materion has no effect on the direction of Fortescue Metals i.e., Fortescue Metals and Materion go up and down completely randomly.
Pair Corralation between Fortescue Metals and Materion
Assuming the 90 days horizon Fortescue Metals is expected to generate 1.61 times less return on investment than Materion. But when comparing it to its historical volatility, Fortescue Metals Group is 1.07 times less risky than Materion. It trades about 0.02 of its potential returns per unit of risk. Materion is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest 10,551 in Materion on August 26, 2024 and sell it today you would earn a total of 1,125 from holding Materion or generate 10.66% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Fortescue Metals Group vs. Materion
Performance |
| Timeline |
| Fortescue Metals |
| Materion |
Fortescue Metals and Materion Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Fortescue Metals and Materion
The main advantage of trading using opposite Fortescue Metals and Materion positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fortescue Metals position performs unexpectedly, Materion 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 Materion will offset losses from the drop in Materion's long position.| Fortescue Metals vs. Norra Metals Corp | Fortescue Metals vs. ZincX Resources Corp | Fortescue Metals vs. Nuinsco Resources Limited | Fortescue Metals vs. South Star Battery |
| Materion vs. Skeena Resources | Materion vs. Compass Minerals International | Materion vs. IperionX Limited American | Materion vs. EMX Royalty Corp |
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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.
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