Correlation Between Universal Stainless and FMC

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

By analyzing existing cross correlation between Universal Stainless Alloy and FMC Corporation, you can compare the effects of market volatilities on Universal Stainless and FMC 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 Universal Stainless with a short position of FMC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Universal Stainless and FMC.

Diversification Opportunities for Universal Stainless and FMC

-0.36

Correlation Coefficient

Universal Stainless  FMC

Very good diversification

The 3 months correlation between Universal and FMC is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding Universal Stainless Alloy and FMC Corp. in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FMC Corporation and Universal Stainless 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 Universal Stainless Alloy are associated (or correlated) with FMC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FMC Corporation has no effect on the direction of Universal Stainless i.e., Universal Stainless and FMC go up and down completely randomly.

Pair Corralation between Universal Stainless and FMC

Given the investment horizon of 90 days Universal Stainless Alloy is expected to generate 0.13 times more return on investment than FMC. However, Universal Stainless Alloy is 7.51 times less risky than FMC. It trades about 0.03 of its potential returns per unit of risk. FMC Corporation is currently generating about -0.16 per unit of risk. If you would invest  4,404  in Universal Stainless Alloy on October 11, 2024 and sell it today you would earn a total of  17.00  from holding Universal Stainless Alloy or generate 0.39% return on investment over 90 days.

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

Universal Stainless Alloy  vs.  FMC Corp.

Universal Stainless Alloy

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Universal Stainless Alloy are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Even with relatively uncertain basic indicators, Universal Stainless may actually be approaching a critical reversion point that can send shares even higher in February 2025.

FMC Corporation

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days FMC Corporation has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's primary indicators remain rather sound which may send shares a bit higher in February 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Universal Stainless and FMC

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

The idea behind Universal Stainless Alloy and FMC 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.

Check out your portfolio center.

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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.