Correlation Between FC Investment and URU Metals

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

By analyzing existing cross correlation between FC Investment Trust and URU Metals, you can compare the effects of market volatilities on FC Investment and URU Metals 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 FC Investment with a short position of URU Metals. Check out your portfolio center. Please also check ongoing floating volatility patterns of FC Investment and URU Metals.

Diversification Opportunities for FC Investment and URU Metals

0.61

Correlation Coefficient

FC Investment  URU Metals

Poor diversification

The 3 months correlation between FCIT and URU is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding FC Investment Trust and URU Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on URU Metals and FC Investment 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 FC Investment Trust are associated (or correlated) with URU Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of URU Metals has no effect on the direction of FC Investment i.e., FC Investment and URU Metals go up and down completely randomly.

Pair Corralation between FC Investment and URU Metals

Assuming the 90 days trading horizon FC Investment Trust is expected to under-perform the URU Metals. But the stock apears to be less risky and, when comparing its historical volatility, FC Investment Trust is 8.0 times less risky than URU Metals. The stock trades about -0.06 of its potential returns per unit of risk. The URU Metals is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  13,500  in URU Metals on September 23, 2024 and sell it today you would earn a total of  2,500  from holding URU Metals or generate 18.52% return on investment over 90 days.

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

FC Investment Trust  vs.  URU Metals

FC Investment Trust

Risk-Adjusted Performance

15 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in FC Investment Trust are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, FC Investment may actually be approaching a critical reversion point that can send shares even higher in January 2025.

URU Metals

Risk-Adjusted Performance

6 of 100

Modest

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

Pair Trading with FC Investment and URU Metals

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

The idea behind FC Investment Trust and URU Metals 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.