Correlation Between Formetal and Clean Science

Can any of the company-specific risk be diversified away by investing in both Formetal and Clean Science 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 Formetal and Clean Science into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Formetal Co and Clean Science co, you can compare the effects of market volatilities on Formetal and Clean Science 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 Formetal with a short position of Clean Science. Check out your portfolio center. Please also check ongoing floating volatility patterns of Formetal and Clean Science.

Diversification Opportunities for Formetal and Clean Science

0.59

Correlation Coefficient

Formetal  Clean Science

Very weak diversification

The 3 months correlation between Formetal and Clean is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Formetal Co and Clean Science co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Clean Science co and Formetal 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 Formetal Co are associated (or correlated) with Clean Science. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Clean Science co has no effect on the direction of Formetal i.e., Formetal and Clean Science go up and down completely randomly.

Pair Corralation between Formetal and Clean Science

Assuming the 90 days trading horizon Formetal Co is expected to generate 1.9 times more return on investment than Clean Science. However, Formetal is 1.9 times more volatile than Clean Science co. It trades about 0.07 of its potential returns per unit of risk. Clean Science co is currently generating about 0.06 per unit of risk. If you would invest  289,139  in Formetal Co on December 24, 2024 and sell it today you would earn a total of  37,361  from holding Formetal Co or generate 12.92% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.28%
Values	Daily Returns

Formetal Co  vs.  Clean Science co

Formetal

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Formetal Co are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Formetal sustained solid returns over the last few months and may actually be approaching a breakup point.

Clean Science co

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Clean Science co are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Clean Science may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Formetal and Clean Science

The main advantage of trading using opposite Formetal and Clean Science positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Formetal position performs unexpectedly, Clean Science 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 Clean Science will offset losses from the drop in Clean Science's long position.

The idea behind Formetal Co and Clean Science co 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.