Correlation Between FMC and Verkkokauppa Oyj

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

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

Diversification Opportunities for FMC and Verkkokauppa Oyj

0.74

Correlation Coefficient

FMC  Verkkokauppa Oyj

Poor diversification

The 3 months correlation between FMC and Verkkokauppa is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding FMC Corp. and Verkkokauppa Oyj in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Verkkokauppa Oyj 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 Verkkokauppa Oyj. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Verkkokauppa Oyj has no effect on the direction of FMC i.e., FMC and Verkkokauppa Oyj go up and down completely randomly.

Pair Corralation between FMC and Verkkokauppa Oyj

Considering the 90-day investment horizon FMC Corporation is expected to under-perform the Verkkokauppa Oyj. In addition to that, FMC is 1.04 times more volatile than Verkkokauppa Oyj. It trades about -0.16 of its total potential returns per unit of risk. Verkkokauppa Oyj is currently generating about -0.13 per unit of volatility. If you would invest  174.00  in Verkkokauppa Oyj on October 5, 2024 and sell it today you would lose (30.00) from holding Verkkokauppa Oyj or give up 17.24% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	93.55%
Values	Daily Returns

FMC Corp.  vs.  Verkkokauppa Oyj

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.

Verkkokauppa Oyj

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Verkkokauppa Oyj has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's technical and fundamental 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.

Pair Trading with FMC and Verkkokauppa Oyj

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

The idea behind FMC Corporation and Verkkokauppa Oyj 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.