Correlation Between Materion and Fortescue Metals

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

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

Diversification Opportunities for Materion and Fortescue Metals

-0.18

Correlation Coefficient

Materion  Fortescue Metals

Good diversification

The 3 months correlation between Materion and Fortescue is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding Materion and Fortescue Metals Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fortescue Metals and Materion 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 Materion are associated (or correlated) with Fortescue Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fortescue Metals has no effect on the direction of Materion i.e., Materion and Fortescue Metals go up and down completely randomly.

Pair Corralation between Materion and Fortescue Metals

Given the investment horizon of 90 days Materion is expected to generate 1.15 times more return on investment than Fortescue Metals. However, Materion is 1.15 times more volatile than Fortescue Metals Group. It trades about 0.02 of its potential returns per unit of risk. Fortescue Metals Group is currently generating about -0.06 per unit of risk. If you would invest  11,062  in Materion on September 4, 2024 and sell it today you would earn a total of  376.00  from holding Materion or generate 3.4% return on investment over 90 days.

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

Materion  vs.  Fortescue Metals Group

Materion

Risk-Adjusted Performance

4 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Materion are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady basic indicators, Materion may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Fortescue Metals

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Fortescue Metals Group are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile technical and fundamental indicators, Fortescue Metals showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Materion and Fortescue Metals

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

The idea behind Materion and Fortescue Metals Group 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..