Correlation Between Ivanhoe Electric and FMC
Can any of the company-specific risk be diversified away by investing in both Ivanhoe Electric 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 Ivanhoe Electric and FMC into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ivanhoe Electric and FMC Corporation, you can compare the effects of market volatilities on Ivanhoe Electric 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 Ivanhoe Electric with a short position of FMC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ivanhoe Electric and FMC.
Diversification Opportunities for Ivanhoe Electric and FMC
0.6 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Ivanhoe and FMC is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Ivanhoe Electric and FMC Corp. in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FMC Corporation and Ivanhoe Electric 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 Ivanhoe Electric 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 Ivanhoe Electric i.e., Ivanhoe Electric and FMC go up and down completely randomly.
Pair Corralation between Ivanhoe Electric and FMC
Allowing for the 90-day total investment horizon Ivanhoe Electric is expected to generate 1.25 times more return on investment than FMC. However, Ivanhoe Electric is 1.25 times more volatile than FMC Corporation. It trades about -0.01 of its potential returns per unit of risk. FMC Corporation is currently generating about -0.03 per unit of risk. If you would invest 866.00 in Ivanhoe Electric on November 9, 2024 and sell it today you would lose (272.00) from holding Ivanhoe Electric or give up 31.41% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ivanhoe Electric vs. FMC Corp.
Performance |
| Timeline |
| Ivanhoe Electric |
| FMC Corporation |
Ivanhoe Electric and FMC Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ivanhoe Electric and FMC
The main advantage of trading using opposite Ivanhoe Electric and FMC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ivanhoe Electric 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.| Ivanhoe Electric vs. Kenon Holdings | Ivanhoe Electric vs. NiSource | Ivanhoe Electric vs. Vita Coco | Ivanhoe Electric vs. Scandinavian Tobacco Group |
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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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