Correlation Between FMC and Swan Defined

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

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

Diversification Opportunities for FMC and Swan Defined

0.8

Correlation Coefficient

FMC  Swan Defined

Very poor diversification

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

Pair Corralation between FMC and Swan Defined

Considering the 90-day investment horizon FMC is expected to generate 1.46 times less return on investment than Swan Defined. In addition to that, FMC is 4.39 times more volatile than Swan Defined Risk. It trades about 0.0 of its total potential returns per unit of risk. Swan Defined Risk is currently generating about 0.01 per unit of volatility. If you would invest  915.00  in Swan Defined Risk on October 5, 2024 and sell it today you would earn a total of  8.00  from holding Swan Defined Risk or generate 0.87% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	99.63%
Values	Daily Returns

FMC Corp.  vs.  Swan Defined Risk

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.

Swan Defined Risk

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Swan Defined Risk has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Pair Trading with FMC and Swan Defined

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

The idea behind FMC Corporation and Swan Defined Risk 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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.