Correlation Between Investment and Ferrexpo PLC

Can any of the company-specific risk be diversified away by investing in both Investment and Ferrexpo PLC 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 Investment and Ferrexpo PLC into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between The Investment and Ferrexpo PLC, you can compare the effects of market volatilities on Investment and Ferrexpo PLC 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 Investment with a short position of Ferrexpo PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Investment and Ferrexpo PLC.

Diversification Opportunities for Investment and Ferrexpo PLC

0.72

Correlation Coefficient

Investment  Ferrexpo PLC

Poor diversification

The 3 months correlation between Investment and Ferrexpo is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding The Investment and Ferrexpo PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ferrexpo PLC and Investment 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 The Investment are associated (or correlated) with Ferrexpo PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ferrexpo PLC has no effect on the direction of Investment i.e., Investment and Ferrexpo PLC go up and down completely randomly.

Pair Corralation between Investment and Ferrexpo PLC

Assuming the 90 days trading horizon Investment is expected to generate 52.9 times less return on investment than Ferrexpo PLC. But when comparing it to its historical volatility, The Investment is 11.74 times less risky than Ferrexpo PLC. It trades about 0.06 of its potential returns per unit of risk. Ferrexpo PLC is currently generating about 0.28 of returns per unit of risk over similar time horizon. If you would invest  3,890  in Ferrexpo PLC on September 12, 2024 and sell it today you would earn a total of  7,010  from holding Ferrexpo PLC or generate 180.21% return on investment over 90 days.

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

The Investment  vs.  Ferrexpo PLC

Investment

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in The Investment are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, Investment is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Ferrexpo PLC

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Ferrexpo PLC are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, Ferrexpo PLC unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Investment and Ferrexpo PLC

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

The idea behind The Investment and Ferrexpo PLC 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.