Correlation Between Fortescue Metals and Carmat SA

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

Diversification Opportunities for Fortescue Metals and Carmat SA

0.24

Correlation Coefficient

Fortescue Metals  Carmat SA

Modest diversification

The 3 months correlation between Fortescue and Carmat is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Fortescue Metals Group and Carmat SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Carmat SA 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 Carmat SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Carmat SA has no effect on the direction of Fortescue Metals i.e., Fortescue Metals and Carmat SA go up and down completely randomly.

Pair Corralation between Fortescue Metals and Carmat SA

Assuming the 90 days horizon Fortescue Metals Group is expected to under-perform the Carmat SA. But the stock apears to be less risky and, when comparing its historical volatility, Fortescue Metals Group is 2.68 times less risky than Carmat SA. The stock trades about -0.12 of its potential returns per unit of risk. The Carmat SA is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  94.00  in Carmat SA on December 23, 2024 and sell it today you would lose (7.00) from holding Carmat SA or give up 7.45% of portfolio value over 90 days.

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

Fortescue Metals Group  vs.  Carmat SA

Fortescue Metals

Risk-Adjusted Performance

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 fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Carmat SA

Risk-Adjusted Performance

Very Weak

Over the last 90 days Carmat SA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Carmat SA 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 Carmat SA

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

The idea behind Fortescue Metals Group and Carmat SA 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.

Check out your portfolio center.

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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.