Correlation Between Silo Pharma and Fortescue

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

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

Diversification Opportunities for Silo Pharma and Fortescue

-0.42

Correlation Coefficient

Silo Pharma  Fortescue

Very good diversification

The 3 months correlation between Silo and Fortescue is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding Silo Pharma and Fortescue Metals Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fortescue Metals and Silo Pharma 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 Silo Pharma are associated (or correlated) with Fortescue. 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 Silo Pharma i.e., Silo Pharma and Fortescue go up and down completely randomly.

Pair Corralation between Silo Pharma and Fortescue

Given the investment horizon of 90 days Silo Pharma is expected to generate 35.26 times more return on investment than Fortescue. However, Silo Pharma is 35.26 times more volatile than Fortescue Metals Group. It trades about 0.1 of its potential returns per unit of risk. Fortescue Metals Group is currently generating about -0.03 per unit of risk. If you would invest  100.00  in Silo Pharma on November 29, 2024 and sell it today you would earn a total of  40.00  from holding Silo Pharma or generate 40.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	83.05%
Values	Daily Returns

Silo Pharma  vs.  Fortescue Metals Group

Silo Pharma

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Silo Pharma are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of very abnormal essential indicators, Silo Pharma displayed solid returns over the last few months and may actually be approaching a breakup point.

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 somewhat strong basic indicators, Fortescue is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Silo Pharma and Fortescue

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

The idea behind Silo Pharma 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.