Correlation Between Ferrexpo PLC and Investment

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

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

Diversification Opportunities for Ferrexpo PLC and Investment

0.58

Correlation Coefficient

Ferrexpo PLC  Investment

Very weak diversification

The 3 months correlation between Ferrexpo and Investment is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Ferrexpo PLC and The Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Investment and Ferrexpo PLC 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 Ferrexpo PLC are associated (or correlated) with Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Investment has no effect on the direction of Ferrexpo PLC i.e., Ferrexpo PLC and Investment go up and down completely randomly.

Pair Corralation between Ferrexpo PLC and Investment

Assuming the 90 days trading horizon Ferrexpo PLC is expected to generate 11.09 times more return on investment than Investment. However, Ferrexpo PLC is 11.09 times more volatile than The Investment. It trades about 0.18 of its potential returns per unit of risk. The Investment is currently generating about 0.08 per unit of risk. If you would invest  4,470  in Ferrexpo PLC on September 3, 2024 and sell it today you would earn a total of  3,660  from holding Ferrexpo PLC or generate 81.88% return on investment over 90 days.

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

Ferrexpo PLC  vs.  The Investment

Ferrexpo PLC

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Ferrexpo PLC are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, Ferrexpo PLC unveiled solid returns over the last few months and may actually be approaching a breakup point.

Investment

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in The Investment are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, Investment is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Ferrexpo PLC and Investment

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

The idea behind Ferrexpo PLC and The Investment 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.