Correlation Between Yara International and FMC
Can any of the company-specific risk be diversified away by investing in both Yara International 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 Yara International and FMC into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Yara International ASA and FMC Corporation, you can compare the effects of market volatilities on Yara International 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 Yara International with a short position of FMC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Yara International and FMC.
Diversification Opportunities for Yara International and FMC
0.02 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Yara and FMC is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding Yara International ASA and FMC Corp. in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FMC Corporation and Yara International 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 Yara International ASA 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 Yara International i.e., Yara International and FMC go up and down completely randomly.
Pair Corralation between Yara International and FMC
Assuming the 90 days horizon Yara International ASA is expected to under-perform the FMC. But the pink sheet apears to be less risky and, when comparing its historical volatility, Yara International ASA is 1.46 times less risky than FMC. The pink sheet trades about -0.02 of its potential returns per unit of risk. The FMC Corporation is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest 5,782 in FMC Corporation on September 1, 2024 and sell it today you would earn a total of 127.00 from holding FMC Corporation or generate 2.2% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Yara International ASA vs. FMC Corp.
Performance |
| Timeline |
| Yara International ASA |
| FMC Corporation |
Yara International and FMC Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Yara International and FMC
The main advantage of trading using opposite Yara International and FMC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Yara International 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.| Yara International vs. Boswell J G | Yara International vs. KS AG DRC | Yara International vs. ICL Israel Chemicals | Yara International vs. CF Industries Holdings |
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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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