Correlation Between Fortescue Metals and Unicharm

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

Diversification Opportunities for Fortescue Metals and Unicharm

0.27

Correlation Coefficient

Fortescue Metals  Unicharm

Modest diversification

The 3 months correlation between Fortescue and Unicharm is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Fortescue Metals Group and Unicharm in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Unicharm 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 Unicharm. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Unicharm has no effect on the direction of Fortescue Metals i.e., Fortescue Metals and Unicharm go up and down completely randomly.

Pair Corralation between Fortescue Metals and Unicharm

Assuming the 90 days horizon Fortescue Metals Group is expected to under-perform the Unicharm. But the stock apears to be less risky and, when comparing its historical volatility, Fortescue Metals Group is 1.57 times less risky than Unicharm. The stock trades about -0.12 of its potential returns per unit of risk. The Unicharm is currently generating about -0.05 of returns per unit of risk over similar time horizon. If you would invest  802.00  in Unicharm on December 23, 2024 and sell it today you would lose (92.00) from holding Unicharm or give up 11.47% 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.  Unicharm

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.

Unicharm

Risk-Adjusted Performance

Very Weak

Over the last 90 days Unicharm has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Fortescue Metals and Unicharm

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

The idea behind Fortescue Metals Group and Unicharm 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.