Correlation Between ChemoMetec and FOM Technologies

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

By analyzing existing cross correlation between ChemoMetec AS and FOM Technologies AS, you can compare the effects of market volatilities on ChemoMetec and FOM Technologies 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 ChemoMetec with a short position of FOM Technologies. Check out your portfolio center. Please also check ongoing floating volatility patterns of ChemoMetec and FOM Technologies.

Diversification Opportunities for ChemoMetec and FOM Technologies

-0.7

Correlation Coefficient

ChemoMetec  FOM Technologies

Excellent diversification

The 3 months correlation between ChemoMetec and FOM is -0.7. Overlapping area represents the amount of risk that can be diversified away by holding ChemoMetec AS and FOM Technologies AS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FOM Technologies and ChemoMetec 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 ChemoMetec AS are associated (or correlated) with FOM Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FOM Technologies has no effect on the direction of ChemoMetec i.e., ChemoMetec and FOM Technologies go up and down completely randomly.

Pair Corralation between ChemoMetec and FOM Technologies

Assuming the 90 days trading horizon ChemoMetec AS is expected to generate 0.6 times more return on investment than FOM Technologies. However, ChemoMetec AS is 1.68 times less risky than FOM Technologies. It trades about 0.04 of its potential returns per unit of risk. FOM Technologies AS is currently generating about 0.02 per unit of risk. If you would invest  48,620  in ChemoMetec AS on December 30, 2024 and sell it today you would earn a total of  2,380  from holding ChemoMetec AS or generate 4.9% return on investment over 90 days.

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

ChemoMetec AS  vs.  FOM Technologies AS

ChemoMetec AS

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in ChemoMetec AS are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak fundamental indicators, ChemoMetec may actually be approaching a critical reversion point that can send shares even higher in April 2025.

FOM Technologies

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in FOM Technologies AS are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy primary indicators, FOM Technologies is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with ChemoMetec and FOM Technologies

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

The idea behind ChemoMetec AS and FOM Technologies AS 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.