Correlation Between China Green and FMC

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

By analyzing existing cross correlation between China Green Agriculture and FMC Corporation, you can compare the effects of market volatilities on China Green 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 China Green with a short position of FMC. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Green and FMC.

Diversification Opportunities for China Green and FMC

-0.01

Correlation Coefficient

China Green  FMC

Good diversification

The 3 months correlation between China and FMC is -0.01. Overlapping area represents the amount of risk that can be diversified away by holding China Green Agriculture and FMC Corp. in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FMC Corporation and China Green 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 China Green Agriculture 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 China Green i.e., China Green and FMC go up and down completely randomly.

Pair Corralation between China Green and FMC

Considering the 90-day investment horizon China Green Agriculture is expected to generate 2.52 times more return on investment than FMC. However, China Green is 2.52 times more volatile than FMC Corporation. It trades about 0.0 of its potential returns per unit of risk. FMC Corporation is currently generating about -0.05 per unit of risk. If you would invest  481.00  in China Green Agriculture on September 3, 2024 and sell it today you would lose (283.00) from holding China Green Agriculture or give up 58.84% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.38%
Values	Daily Returns

China Green Agriculture  vs.  FMC Corp.

China Green Agriculture

Risk-Adjusted Performance

5 of 100

Modest

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

FMC Corporation

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days FMC Corporation has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound primary indicators, FMC is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with China Green and FMC

The main advantage of trading using opposite China Green and FMC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Green 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 China Green Agriculture 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..