Correlation Between Fortescue Metals and AptarGroup

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

Diversification Opportunities for Fortescue Metals and AptarGroup

-0.39

Correlation Coefficient

Fortescue Metals  AptarGroup

Very good diversification

The 3 months correlation between Fortescue and AptarGroup is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding Fortescue Metals Group and AptarGroup in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AptarGroup 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 AptarGroup. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AptarGroup has no effect on the direction of Fortescue Metals i.e., Fortescue Metals and AptarGroup go up and down completely randomly.

Pair Corralation between Fortescue Metals and AptarGroup

Assuming the 90 days horizon Fortescue Metals Group is expected to under-perform the AptarGroup. In addition to that, Fortescue Metals is 1.5 times more volatile than AptarGroup. It trades about -0.04 of its total potential returns per unit of risk. AptarGroup is currently generating about 0.06 per unit of volatility. If you would invest  14,288  in AptarGroup on October 8, 2024 and sell it today you would earn a total of  672.00  from holding AptarGroup or generate 4.7% return on investment over 90 days.

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

Fortescue Metals Group  vs.  AptarGroup

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.

AptarGroup

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in AptarGroup are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, AptarGroup is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Fortescue Metals and AptarGroup

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

The idea behind Fortescue Metals Group and AptarGroup 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.