Correlation Between Fortescue Metals and Gateway Real

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

Diversification Opportunities for Fortescue Metals and Gateway Real

0.31

Correlation Coefficient

Fortescue Metals  Gateway Real

Weak diversification

The 3 months correlation between Fortescue and Gateway is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Fortescue Metals Group and Gateway Real Estate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gateway Real Estate 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 Gateway Real. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gateway Real Estate has no effect on the direction of Fortescue Metals i.e., Fortescue Metals and Gateway Real go up and down completely randomly.

Pair Corralation between Fortescue Metals and Gateway Real

Assuming the 90 days horizon Fortescue Metals is expected to generate 30.92 times less return on investment than Gateway Real. But when comparing it to its historical volatility, Fortescue Metals Group is 23.12 times less risky than Gateway Real. It trades about 0.19 of its potential returns per unit of risk. Gateway Real Estate is currently generating about 0.25 of returns per unit of risk over similar time horizon. If you would invest  38.00  in Gateway Real Estate on October 24, 2024 and sell it today you would earn a total of  61.00  from holding Gateway Real Estate or generate 160.53% return on investment over 90 days.

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

Fortescue Metals Group  vs.  Gateway Real Estate

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.

Gateway Real Estate

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Gateway Real Estate are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Gateway Real reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Fortescue Metals and Gateway Real

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

The idea behind Fortescue Metals Group and Gateway Real Estate 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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.