Correlation Between FMC and Lightwave Logic
Can any of the company-specific risk be diversified away by investing in both FMC and Lightwave Logic 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 FMC and Lightwave Logic into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between FMC Corporation and Lightwave Logic, you can compare the effects of market volatilities on FMC and Lightwave Logic 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 FMC with a short position of Lightwave Logic. Check out your portfolio center. Please also check ongoing floating volatility patterns of FMC and Lightwave Logic.
Diversification Opportunities for FMC and Lightwave Logic
-0.36 | Correlation Coefficient |
Very good diversification
The 3 months correlation between FMC and Lightwave is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding FMC Corp. and Lightwave Logic in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lightwave Logic and FMC 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 FMC Corporation are associated (or correlated) with Lightwave Logic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lightwave Logic has no effect on the direction of FMC i.e., FMC and Lightwave Logic go up and down completely randomly.
Pair Corralation between FMC and Lightwave Logic
Considering the 90-day investment horizon FMC Corporation is expected to generate 0.93 times more return on investment than Lightwave Logic. However, FMC Corporation is 1.08 times less risky than Lightwave Logic. It trades about -0.09 of its potential returns per unit of risk. Lightwave Logic is currently generating about -0.19 per unit of risk. If you would invest 6,186 in FMC Corporation on January 26, 2024 and sell it today you would lose (346.00) from holding FMC Corporation or give up 5.59% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
FMC Corp. vs. Lightwave Logic
Performance |
| Timeline |
| FMC Corporation |
| Lightwave Logic |
FMC and Lightwave Logic Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with FMC and Lightwave Logic
The main advantage of trading using opposite FMC and Lightwave Logic positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if FMC position performs unexpectedly, Lightwave Logic 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 Lightwave Logic will offset losses from the drop in Lightwave Logic's long position.The idea behind FMC Corporation and Lightwave Logic 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.| Lightwave Logic vs. Innospec | Lightwave Logic vs. H B Fuller | Lightwave Logic vs. Quaker Chemical | Lightwave Logic vs. Minerals Technologies |
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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
Other Complementary Tools
| Price Transformation Use Price Transformation models to analyze the depth of different equity instruments across global markets | |
| Fundamentals Comparison Compare fundamentals across multiple equities to find investing opportunities | |
| ETFs Find actively traded Exchange Traded Funds (ETF) from around the world | |
| Portfolio Rebalancing Analyze risk-adjusted returns against different time horizons to find asset-allocation targets | |
| Global Correlations Find global opportunities by holding instruments from different markets | |
| Bond Analysis Evaluate and analyze corporate bonds as a potential investment for your portfolios. |