Correlation Between FMC and Tcc Steel

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

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

Diversification Opportunities for FMC and Tcc Steel

0.8

Correlation Coefficient

FMC  Tcc Steel

Very poor diversification

The 3 months correlation between FMC and Tcc is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding FMC Corp. and Tcc Steel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tcc Steel and FMC 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 FMC Corporation are associated (or correlated) with Tcc Steel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tcc Steel has no effect on the direction of FMC i.e., FMC and Tcc Steel go up and down completely randomly.

Pair Corralation between FMC and Tcc Steel

Considering the 90-day investment horizon FMC Corporation is expected to under-perform the Tcc Steel. But the stock apears to be less risky and, when comparing its historical volatility, FMC Corporation is 1.96 times less risky than Tcc Steel. The stock trades about -0.06 of its potential returns per unit of risk. The Tcc Steel is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  1,896,212  in Tcc Steel on October 5, 2024 and sell it today you would earn a total of  843,788  from holding Tcc Steel or generate 44.5% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	96.92%
Values	Daily Returns

FMC Corp.  vs.  Tcc Steel

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 fragile performance in the last few months, the Stock's primary indicators remain rather sound which may send shares a bit higher in February 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Tcc Steel

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Tcc Steel has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with FMC and Tcc Steel

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

The idea behind FMC Corporation and Tcc Steel 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.