Correlation Between Fortescue Metals and VARIOUS EATERIES

Can any of the company-specific risk be diversified away by investing in both Fortescue Metals and VARIOUS EATERIES 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 VARIOUS EATERIES 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 VARIOUS EATERIES LS, you can compare the effects of market volatilities on Fortescue Metals and VARIOUS EATERIES 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 VARIOUS EATERIES. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fortescue Metals and VARIOUS EATERIES.

Diversification Opportunities for Fortescue Metals and VARIOUS EATERIES

0.51

Correlation Coefficient

Fortescue Metals  VARIOUS EATERIES

Very weak diversification

The 3 months correlation between Fortescue and VARIOUS is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Fortescue Metals Group and VARIOUS EATERIES LS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VARIOUS EATERIES 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 VARIOUS EATERIES. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VARIOUS EATERIES has no effect on the direction of Fortescue Metals i.e., Fortescue Metals and VARIOUS EATERIES go up and down completely randomly.

Pair Corralation between Fortescue Metals and VARIOUS EATERIES

Assuming the 90 days horizon Fortescue Metals Group is expected to generate 1.32 times more return on investment than VARIOUS EATERIES. However, Fortescue Metals is 1.32 times more volatile than VARIOUS EATERIES LS. It trades about 0.19 of its potential returns per unit of risk. VARIOUS EATERIES LS is currently generating about -0.24 per unit of risk. If you would invest  1,102  in Fortescue Metals Group on October 24, 2024 and sell it today you would earn a total of  58.00  from holding Fortescue Metals Group or generate 5.26% return on investment over 90 days.

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

Fortescue Metals Group  vs.  VARIOUS EATERIES LS

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. Despite nearly stable basic indicators, Fortescue Metals is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

VARIOUS EATERIES

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days VARIOUS EATERIES LS 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 basic 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 Fortescue Metals and VARIOUS EATERIES

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

The idea behind Fortescue Metals Group and VARIOUS EATERIES LS 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.