Correlation Between Yara International and FMC

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

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

Diversification Opportunities for Yara International and FMC

-0.49

Correlation Coefficient

Yara International  FMC

Very good diversification

The 3 months correlation between Yara and FMC is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding Yara International ASA and FMC Corp. in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FMC Corporation and Yara International 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 Yara International ASA 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 Yara International i.e., Yara International and FMC go up and down completely randomly.

Pair Corralation between Yara International and FMC

Assuming the 90 days horizon Yara International ASA is expected to generate 0.59 times more return on investment than FMC. However, Yara International ASA is 1.71 times less risky than FMC. It trades about -0.02 of its potential returns per unit of risk. FMC Corporation is currently generating about -0.09 per unit of risk. If you would invest  1,572  in Yara International ASA on January 25, 2024 and sell it today you would lose (17.00) from holding Yara International ASA or give up 1.08% of portfolio value over 90 days.

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

Yara International ASA  vs.  FMC Corp.

Yara International ASA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Yara International ASA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong forward indicators, Yara International is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

FMC Corporation

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in FMC Corporation are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather inconsistent primary indicators, FMC may actually be approaching a critical reversion point that can send shares even higher in May 2024.

Pair Trading with Yara International and FMC

The main advantage of trading using opposite Yara International and FMC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Yara International 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 Yara International ASA 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.

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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 Commodity Directory module to find actively traded commodities issued by global exchanges.