Correlation Between Formycon and Capital Drilling

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

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

Diversification Opportunities for Formycon and Capital Drilling

0.83

Correlation Coefficient

Formycon  Capital Drilling

Very poor diversification

The 3 months correlation between Formycon and Capital is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Formycon AG and Capital Drilling in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Capital Drilling and Formycon 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 Formycon AG are associated (or correlated) with Capital Drilling. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Capital Drilling has no effect on the direction of Formycon i.e., Formycon and Capital Drilling go up and down completely randomly.

Pair Corralation between Formycon and Capital Drilling

Assuming the 90 days trading horizon Formycon is expected to generate 1.01 times less return on investment than Capital Drilling. In addition to that, Formycon is 1.19 times more volatile than Capital Drilling. It trades about 0.18 of its total potential returns per unit of risk. Capital Drilling is currently generating about 0.22 per unit of volatility. If you would invest  6,940  in Capital Drilling on April 20, 2025 and sell it today you would earn a total of  2,360  from holding Capital Drilling or generate 34.01% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	96.88%
Values	Daily Returns

Formycon AG  vs.  Capital Drilling

Formycon AG

Risk-Adjusted Performance

Good

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

Capital Drilling

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Capital Drilling are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Capital Drilling unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Formycon and Capital Drilling

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

The idea behind Formycon AG and Capital Drilling 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.