Correlation Between FMC and Itafos

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

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

Diversification Opportunities for FMC and Itafos

-0.46

Correlation Coefficient

FMC  Itafos

Very good diversification

The 3 months correlation between FMC and Itafos is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding FMC Corp. and Itafos Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Itafos Inc 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 Itafos. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Itafos Inc has no effect on the direction of FMC i.e., FMC and Itafos go up and down completely randomly.

Pair Corralation between FMC and Itafos

Considering the 90-day investment horizon FMC Corporation is expected to under-perform the Itafos. In addition to that, FMC is 2.21 times more volatile than Itafos Inc. It trades about -0.03 of its total potential returns per unit of risk. Itafos Inc is currently generating about 0.2 per unit of volatility. If you would invest  123.00  in Itafos Inc on December 27, 2024 and sell it today you would earn a total of  35.00  from holding Itafos Inc or generate 28.46% return on investment over 90 days.

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

FMC Corp.  vs.  Itafos Inc

FMC Corporation

Risk-Adjusted Performance

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 latest fragile performance, the Stock's primary indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Itafos Inc

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Itafos Inc are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak fundamental indicators, Itafos reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with FMC and Itafos

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

The idea behind FMC Corporation and Itafos Inc 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.