Correlation Between Fortescue Metals and Huntsman Exploration
Can any of the company-specific risk be diversified away by investing in both Fortescue Metals and Huntsman Exploration 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 Huntsman Exploration 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 Huntsman Exploration, you can compare the effects of market volatilities on Fortescue Metals and Huntsman Exploration 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 Huntsman Exploration. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fortescue Metals and Huntsman Exploration.
Diversification Opportunities for Fortescue Metals and Huntsman Exploration
0.48 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Fortescue and Huntsman is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Fortescue Metals Group and Huntsman Exploration in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Huntsman Exploration 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 Huntsman Exploration. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Huntsman Exploration has no effect on the direction of Fortescue Metals i.e., Fortescue Metals and Huntsman Exploration go up and down completely randomly.
Pair Corralation between Fortescue Metals and Huntsman Exploration
Assuming the 90 days horizon Fortescue Metals is expected to generate 12.33 times less return on investment than Huntsman Exploration. But when comparing it to its historical volatility, Fortescue Metals Group is 8.46 times less risky than Huntsman Exploration. It trades about 0.14 of its potential returns per unit of risk. Huntsman Exploration is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest 2.60 in Huntsman Exploration on November 2, 2024 and sell it today you would earn a total of 2.30 from holding Huntsman Exploration or generate 88.46% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 95.0% |
| Values | Daily Returns |
Fortescue Metals Group vs. Huntsman Exploration
Performance |
| Timeline |
| Fortescue Metals |
| Huntsman Exploration |
Fortescue Metals and Huntsman Exploration Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Fortescue Metals and Huntsman Exploration
The main advantage of trading using opposite Fortescue Metals and Huntsman Exploration positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fortescue Metals position performs unexpectedly, Huntsman Exploration 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 Huntsman Exploration will offset losses from the drop in Huntsman Exploration's long position.| Fortescue Metals vs. IGO Limited | Fortescue Metals vs. Qubec Nickel Corp | Fortescue Metals vs. Nickel Mines Limited | Fortescue Metals vs. Mineral Resources Limited |
| Huntsman Exploration vs. Aurelia Metals Limited | Huntsman Exploration vs. Adriatic Metals PLC | Huntsman Exploration vs. American Helium | Huntsman Exploration vs. Progressive Planet Solutions |
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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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