Correlation Between FMS Enterprises and Delek Automotive

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

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

Diversification Opportunities for FMS Enterprises and Delek Automotive

0.86

Correlation Coefficient

FMS Enterprises  Delek Automotive

Very poor diversification

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

Pair Corralation between FMS Enterprises and Delek Automotive

Assuming the 90 days trading horizon FMS Enterprises is expected to generate 3.93 times less return on investment than Delek Automotive. But when comparing it to its historical volatility, FMS Enterprises Migun is 1.11 times less risky than Delek Automotive. It trades about 0.1 of its potential returns per unit of risk. Delek Automotive Systems is currently generating about 0.35 of returns per unit of risk over similar time horizon. 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

FMS Enterprises Migun  vs.  Delek Automotive Systems

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.

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.

Pair Trading with FMS Enterprises and Delek Automotive

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

The idea behind FMS Enterprises Migun and Delek Automotive Systems 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.