Correlation Between Chemours and FIBRA Storage

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

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

Diversification Opportunities for Chemours and FIBRA Storage

0.86

Correlation Coefficient

Chemours  FIBRA Storage

Very poor diversification

The 3 months correlation between Chemours and FIBRA is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding The Chemours and FIBRA Storage in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FIBRA Storage and Chemours 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 The Chemours are associated (or correlated) with FIBRA Storage. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FIBRA Storage has no effect on the direction of Chemours i.e., Chemours and FIBRA Storage go up and down completely randomly.

Pair Corralation between Chemours and FIBRA Storage

Assuming the 90 days horizon The Chemours is expected to generate 1.84 times more return on investment than FIBRA Storage. However, Chemours is 1.84 times more volatile than FIBRA Storage. It trades about 0.2 of its potential returns per unit of risk. FIBRA Storage is currently generating about 0.32 per unit of risk. If you would invest  35,523  in The Chemours on September 27, 2024 and sell it today you would earn a total of  5,367  from holding The Chemours or generate 15.11% return on investment over 90 days.

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

The Chemours  vs.  FIBRA Storage

Chemours

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in The Chemours are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak primary indicators, Chemours showed solid returns over the last few months and may actually be approaching a breakup point.

FIBRA Storage

Risk-Adjusted Performance

25 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in FIBRA Storage are ranked lower than 25 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak technical and fundamental indicators, FIBRA Storage exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Chemours and FIBRA Storage

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

The idea behind The Chemours and FIBRA Storage 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.