Correlation Between Delek Automotive and FMS Enterprises

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

By analyzing existing cross correlation between Delek Automotive Systems and FMS Enterprises Migun, you can compare the effects of market volatilities on Delek Automotive and FMS Enterprises 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 Delek Automotive with a short position of FMS Enterprises. Check out your portfolio center. Please also check ongoing floating volatility patterns of Delek Automotive and FMS Enterprises.

Diversification Opportunities for Delek Automotive and FMS Enterprises

0.86

Correlation Coefficient

Delek Automotive  FMS Enterprises

Very poor diversification

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

Pair Corralation between Delek Automotive and FMS Enterprises

Assuming the 90 days trading horizon Delek Automotive Systems is expected to generate 1.11 times more return on investment than FMS Enterprises. However, Delek Automotive is 1.11 times more volatile than FMS Enterprises Migun. It trades about 0.35 of its potential returns per unit of risk. FMS Enterprises Migun is currently generating about 0.1 per unit of risk. If you would invest  219,700  in Delek Automotive Systems on September 26, 2024 and sell it today you would earn a total of  69,100  from holding Delek Automotive Systems or generate 31.45% return on investment over 90 days.

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

Delek Automotive Systems  vs.  FMS Enterprises Migun

Delek Automotive Systems

Risk-Adjusted Performance

25 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Delek Automotive Systems are ranked lower than 25 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Delek Automotive sustained solid returns over the last few months and may actually be approaching a breakup point.

FMS Enterprises Migun

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in FMS Enterprises Migun are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, FMS Enterprises sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Delek Automotive and FMS Enterprises

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

The idea behind Delek Automotive Systems and FMS Enterprises Migun 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.