Correlation Between Fortescue Metals and Anhui Conch

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

By analyzing existing cross correlation between Fortescue Metals Group and Anhui Conch Cement, you can compare the effects of market volatilities on Fortescue Metals and Anhui Conch 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 Fortescue Metals with a short position of Anhui Conch. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fortescue Metals and Anhui Conch.

Diversification Opportunities for Fortescue Metals and Anhui Conch

0.72

Correlation Coefficient

Fortescue Metals  Anhui Conch

Poor diversification

The 3 months correlation between Fortescue and Anhui is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Fortescue Metals Group and Anhui Conch Cement in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Anhui Conch Cement and Fortescue Metals 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 Fortescue Metals Group are associated (or correlated) with Anhui Conch. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Anhui Conch Cement has no effect on the direction of Fortescue Metals i.e., Fortescue Metals and Anhui Conch go up and down completely randomly.

Pair Corralation between Fortescue Metals and Anhui Conch

Assuming the 90 days horizon Fortescue Metals Group is expected to under-perform the Anhui Conch. But the otc stock apears to be less risky and, when comparing its historical volatility, Fortescue Metals Group is 1.47 times less risky than Anhui Conch. The otc stock trades about -0.22 of its potential returns per unit of risk. The Anhui Conch Cement is currently generating about -0.07 of returns per unit of risk over similar time horizon. If you would invest  1,329  in Anhui Conch Cement on October 3, 2024 and sell it today you would lose (60.00) from holding Anhui Conch Cement or give up 4.51% of portfolio value over 90 days.

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

Fortescue Metals Group  vs.  Anhui Conch Cement

Fortescue Metals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Fortescue Metals Group 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 technical and fundamental indicators remain fairly strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Anhui Conch Cement

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Anhui Conch Cement has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of inconsistent performance in the last few months, the Stock's technical indicators remain fairly strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Fortescue Metals and Anhui Conch

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

The idea behind Fortescue Metals Group and Anhui Conch Cement 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.