Correlation Between Whirlpool and FGI Industries

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

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

Diversification Opportunities for Whirlpool and FGI Industries

0.47

Correlation Coefficient

Whirlpool  FGI Industries

Very weak diversification

The 3 months correlation between Whirlpool and FGI is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Whirlpool and FGI Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FGI Industries and Whirlpool 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 Whirlpool are associated (or correlated) with FGI Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FGI Industries has no effect on the direction of Whirlpool i.e., Whirlpool and FGI Industries go up and down completely randomly.

Pair Corralation between Whirlpool and FGI Industries

Considering the 90-day investment horizon Whirlpool is expected to generate 0.5 times more return on investment than FGI Industries. However, Whirlpool is 2.02 times less risky than FGI Industries. It trades about -0.07 of its potential returns per unit of risk. FGI Industries is currently generating about -0.09 per unit of risk. If you would invest  10,644  in Whirlpool on February 4, 2024 and sell it today you would lose (1,088) from holding Whirlpool or give up 10.22% of portfolio value over 90 days.

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

Whirlpool  vs.  FGI Industries

Whirlpool

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Whirlpool has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest conflicting performance, the Stock's technical indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

FGI Industries

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days FGI Industries 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 technical and fundamental indicators remain fairly strong which may send shares a bit higher in June 2024. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Pair Trading with Whirlpool and FGI Industries

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

The idea behind Whirlpool and FGI Industries 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.