Correlation Between Bioceres Crop and FMC

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

By analyzing existing cross correlation between Bioceres Crop Solutions and FMC Corporation, you can compare the effects of market volatilities on Bioceres Crop and FMC 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 Bioceres Crop with a short position of FMC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bioceres Crop and FMC.

Diversification Opportunities for Bioceres Crop and FMC

-0.26

Correlation Coefficient

Bioceres Crop  FMC

Very good diversification

The 3 months correlation between Bioceres and FMC is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding Bioceres Crop Solutions and FMC Corp. in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FMC Corporation and Bioceres Crop 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 Bioceres Crop Solutions are associated (or correlated) with FMC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FMC Corporation has no effect on the direction of Bioceres Crop i.e., Bioceres Crop and FMC go up and down completely randomly.

Pair Corralation between Bioceres Crop and FMC

Given the investment horizon of 90 days Bioceres Crop Solutions is expected to under-perform the FMC. But the stock apears to be less risky and, when comparing its historical volatility, Bioceres Crop Solutions is 1.99 times less risky than FMC. The stock trades about -0.13 of its potential returns per unit of risk. The FMC Corporation is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  5,052  in FMC Corporation on February 18, 2024 and sell it today you would earn a total of  1,346  from holding FMC Corporation or generate 26.64% return on investment over 90 days.

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

Bioceres Crop Solutions  vs.  FMC Corp.

Bioceres Crop Solutions

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bioceres Crop Solutions has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest inconsistent performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

FMC Corporation

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in FMC Corporation are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile primary indicators, FMC exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Bioceres Crop and FMC

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

The idea behind Bioceres Crop Solutions and FMC Corporation 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.