Correlation Between Intrepid Potash and FMC
Can any of the company-specific risk be diversified away by investing in both Intrepid Potash 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 Intrepid Potash and FMC into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Intrepid Potash and FMC Corporation, you can compare the effects of market volatilities on Intrepid Potash 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 Intrepid Potash with a short position of FMC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Intrepid Potash and FMC.
Diversification Opportunities for Intrepid Potash and FMC
-0.56 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Intrepid and FMC is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding Intrepid Potash and FMC Corp. in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FMC Corporation and Intrepid Potash 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 Intrepid Potash 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 Intrepid Potash i.e., Intrepid Potash and FMC go up and down completely randomly.
Pair Corralation between Intrepid Potash and FMC
Considering the 90-day investment horizon Intrepid Potash is expected to generate 0.98 times more return on investment than FMC. However, Intrepid Potash is 1.02 times less risky than FMC. It trades about 0.12 of its potential returns per unit of risk. FMC Corporation is currently generating about -0.05 per unit of risk. If you would invest 2,603 in Intrepid Potash on August 27, 2024 and sell it today you would earn a total of 177.00 from holding Intrepid Potash or generate 6.8% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Intrepid Potash vs. FMC Corp.
Performance |
| Timeline |
| Intrepid Potash |
| FMC Corporation |
Intrepid Potash and FMC Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Intrepid Potash and FMC
The main advantage of trading using opposite Intrepid Potash and FMC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Intrepid Potash 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.The idea behind Intrepid Potash and FMC Corporation 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.
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