Correlation Between Formetal and ATON

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

By analyzing existing cross correlation between Formetal Co and ATON Inc, you can compare the effects of market volatilities on Formetal and ATON 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 ATON. Check out your portfolio center. Please also check ongoing floating volatility patterns of Formetal and ATON.

Diversification Opportunities for Formetal and ATON

0.51

Correlation Coefficient

Formetal  ATON

Very weak diversification

The 3 months correlation between Formetal and ATON is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Formetal Co and ATON Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ATON Inc 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 ATON. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ATON Inc has no effect on the direction of Formetal i.e., Formetal and ATON go up and down completely randomly.

Pair Corralation between Formetal and ATON

Assuming the 90 days trading horizon Formetal Co is expected to generate 0.75 times more return on investment than ATON. However, Formetal Co is 1.34 times less risky than ATON. It trades about 0.05 of its potential returns per unit of risk. ATON Inc is currently generating about 0.02 per unit of risk. If you would invest  293,550  in Formetal Co on December 23, 2024 and sell it today you would earn a total of  24,450  from holding Formetal Co or generate 8.33% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Formetal Co  vs.  ATON Inc

Formetal

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Formetal Co are ranked lower than 4 (%) 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.

ATON Inc

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in ATON Inc are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, ATON may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Formetal and ATON

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

The idea behind Formetal Co and ATON Inc 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.

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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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..