Correlation Between Fortescue Metals and HOYA

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

Diversification Opportunities for Fortescue Metals and HOYA

0.33

Correlation Coefficient

Fortescue Metals  HOYA

Weak diversification

The 3 months correlation between Fortescue and HOYA is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Fortescue Metals Group and HOYA Corp. in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HOYA 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 HOYA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HOYA has no effect on the direction of Fortescue Metals i.e., Fortescue Metals and HOYA go up and down completely randomly.

Pair Corralation between Fortescue Metals and HOYA

Assuming the 90 days horizon Fortescue Metals is expected to generate 1.44 times less return on investment than HOYA. In addition to that, Fortescue Metals is 1.49 times more volatile than HOYA Corporation. It trades about 0.19 of its total potential returns per unit of risk. HOYA Corporation is currently generating about 0.4 per unit of volatility. If you would invest  12,090  in HOYA Corporation on October 24, 2024 and sell it today you would earn a total of  1,015  from holding HOYA Corporation or generate 8.4% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	94.44%
Values	Daily Returns

Fortescue Metals Group  vs.  HOYA Corp.

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.

HOYA

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in HOYA Corporation are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, HOYA may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Fortescue Metals and HOYA

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

The idea behind Fortescue Metals Group and HOYA Corporation 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.