Correlation Between FMC and Alarko Holding

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

By analyzing existing cross correlation between FMC Corporation and Alarko Holding AS, you can compare the effects of market volatilities on FMC and Alarko Holding 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 Alarko Holding. Check out your portfolio center. Please also check ongoing floating volatility patterns of FMC and Alarko Holding.

Diversification Opportunities for FMC and Alarko Holding

-0.38

Correlation Coefficient

FMC  Alarko Holding

Very good diversification

The 3 months correlation between FMC and Alarko is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding FMC Corp. and Alarko Holding AS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alarko Holding AS 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 Alarko Holding. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alarko Holding AS has no effect on the direction of FMC i.e., FMC and Alarko Holding go up and down completely randomly.

Pair Corralation between FMC and Alarko Holding

Considering the 90-day investment horizon FMC Corporation is expected to under-perform the Alarko Holding. But the stock apears to be less risky and, when comparing its historical volatility, FMC Corporation is 1.15 times less risky than Alarko Holding. The stock trades about -0.05 of its potential returns per unit of risk. The Alarko Holding AS is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  6,928  in Alarko Holding AS on October 20, 2024 and sell it today you would earn a total of  2,202  from holding Alarko Holding AS or generate 31.78% return on investment over 90 days.

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

FMC Corp.  vs.  Alarko Holding AS

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.

Alarko Holding AS

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Alarko Holding AS are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite fairly inconsistent forward indicators, Alarko Holding may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with FMC and Alarko Holding

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

The idea behind FMC Corporation and Alarko Holding 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.

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.