Correlation Between FMC and American Vanguard

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Can any of the company-specific risk be diversified away by investing in both FMC and American Vanguard 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 American Vanguard into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between FMC Corporation and American Vanguard, you can compare the effects of market volatilities on FMC and American Vanguard 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 American Vanguard. Check out your portfolio center. Please also check ongoing floating volatility patterns of FMC and American Vanguard.

Diversification Opportunities for FMC and American Vanguard

0.52
  Correlation Coefficient

Very weak diversification

The 3 months correlation between FMC and American is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding FMC Corp. and American Vanguard in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Vanguard 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 American Vanguard. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Vanguard has no effect on the direction of FMC i.e., FMC and American Vanguard go up and down completely randomly.

Pair Corralation between FMC and American Vanguard

Considering the 90-day investment horizon FMC is expected to generate 1.02 times less return on investment than American Vanguard. But when comparing it to its historical volatility, FMC Corporation is 1.81 times less risky than American Vanguard. It trades about 0.34 of its potential returns per unit of risk. American Vanguard is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest  1,051  in American Vanguard on December 30, 2023 and sell it today you would earn a total of  244.00  from holding American Vanguard or generate 23.22% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

FMC Corp.  vs.  American Vanguard

 Performance 
       Timeline  
FMC Corporation 

Risk-Adjusted Performance

0 of 100

 
Low
 
High
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 rather sound primary indicators, FMC is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.
American Vanguard 

Risk-Adjusted Performance

6 of 100

 
Low
 
High
Modest
Compared to the overall equity markets, risk-adjusted returns on investments in American Vanguard are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile basic indicators, American Vanguard exhibited solid returns over the last few months and may actually be approaching a breakup point.

FMC and American Vanguard Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with FMC and American Vanguard

The main advantage of trading using opposite FMC and American Vanguard positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if FMC position performs unexpectedly, American Vanguard 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 American Vanguard will offset losses from the drop in American Vanguard's long position.
The idea behind FMC Corporation and American Vanguard 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.

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