Correlation Between FMC and I3 Energy

Can any of the company-specific risk be diversified away by investing in both FMC and I3 Energy 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 I3 Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between FMC Corporation and I3 Energy Plc, you can compare the effects of market volatilities on FMC and I3 Energy 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 I3 Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of FMC and I3 Energy.

Diversification Opportunities for FMC and I3 Energy

-0.26

Correlation Coefficient

FMC  I3 Energy

Very good diversification

The 3 months correlation between FMC and ITEEF is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding FMC Corp. and I3 Energy Plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on I3 Energy Plc 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 I3 Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of I3 Energy Plc has no effect on the direction of FMC i.e., FMC and I3 Energy go up and down completely randomly.

Pair Corralation between FMC and I3 Energy

Considering the 90-day investment horizon FMC Corporation is expected to generate 0.84 times more return on investment than I3 Energy. However, FMC Corporation is 1.19 times less risky than I3 Energy. It trades about -0.16 of its potential returns per unit of risk. I3 Energy Plc is currently generating about -0.21 per unit of risk. If you would invest  6,232  in FMC Corporation on October 5, 2024 and sell it today you would lose (1,358) from holding FMC Corporation or give up 21.79% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	33.87%
Values	Daily Returns

FMC Corp.  vs.  I3 Energy Plc

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.

I3 Energy Plc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days I3 Energy Plc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's technical and fundamental indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with FMC and I3 Energy

The main advantage of trading using opposite FMC and I3 Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if FMC position performs unexpectedly, I3 Energy 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 I3 Energy will offset losses from the drop in I3 Energy's long position.

The idea behind FMC Corporation and I3 Energy Plc 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.