Correlation Between FMC and Coupang LLC

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

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

Diversification Opportunities for FMC and Coupang LLC

-0.15

Correlation Coefficient

FMC  Coupang LLC

Good diversification

The 3 months correlation between FMC and Coupang is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding FMC Corp. and Coupang LLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Coupang LLC and FMC 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 FMC Corporation are associated (or correlated) with Coupang LLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Coupang LLC has no effect on the direction of FMC i.e., FMC and Coupang LLC go up and down completely randomly.

Pair Corralation between FMC and Coupang LLC

Considering the 90-day investment horizon FMC Corporation is expected to under-perform the Coupang LLC. But the stock apears to be less risky and, when comparing its historical volatility, FMC Corporation is 1.04 times less risky than Coupang LLC. The stock trades about -0.27 of its potential returns per unit of risk. The Coupang LLC is currently generating about -0.14 of returns per unit of risk over similar time horizon. If you would invest  2,365  in Coupang LLC on March 8, 2024 and sell it today you would lose (186.00) from holding Coupang LLC or give up 7.86% of portfolio value over 90 days.

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

FMC Corp.  vs.  Coupang LLC

FMC Corporation

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days FMC Corporation has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound primary indicators, FMC is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Coupang LLC

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Coupang LLC are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly inconsistent basic indicators, Coupang LLC reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with FMC and Coupang LLC

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

The idea behind FMC Corporation and Coupang LLC 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.

Check out your portfolio center.

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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..