Correlation Between Fortescue Metals and BC TECHNOLOGY

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

By analyzing existing cross correlation between Fortescue Metals Group and BC TECHNOLOGY GROUP, you can compare the effects of market volatilities on Fortescue Metals and BC TECHNOLOGY 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 Fortescue Metals with a short position of BC TECHNOLOGY. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fortescue Metals and BC TECHNOLOGY.

Diversification Opportunities for Fortescue Metals and BC TECHNOLOGY

0.01

Correlation Coefficient

Fortescue Metals  BC TECHNOLOGY

Significant diversification

The 3 months correlation between Fortescue and 9D2 is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding Fortescue Metals Group and BC TECHNOLOGY GROUP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BC TECHNOLOGY GROUP and Fortescue Metals 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 Fortescue Metals Group are associated (or correlated) with BC TECHNOLOGY. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BC TECHNOLOGY GROUP has no effect on the direction of Fortescue Metals i.e., Fortescue Metals and BC TECHNOLOGY go up and down completely randomly.

Pair Corralation between Fortescue Metals and BC TECHNOLOGY

Assuming the 90 days horizon Fortescue Metals Group is expected to generate 0.51 times more return on investment than BC TECHNOLOGY. However, Fortescue Metals Group is 1.97 times less risky than BC TECHNOLOGY. It trades about -0.18 of its potential returns per unit of risk. BC TECHNOLOGY GROUP is currently generating about -0.12 per unit of risk. If you would invest  892.00  in Fortescue Metals Group on March 25, 2025 and sell it today you would lose (62.00) from holding Fortescue Metals Group or give up 6.95% of portfolio value over 90 days.

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

Fortescue Metals Group  vs.  BC TECHNOLOGY GROUP

Fortescue Metals

Risk-Adjusted Performance

Very Weak

Over the last 90 days Fortescue Metals Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

BC TECHNOLOGY GROUP

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in BC TECHNOLOGY GROUP are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, BC TECHNOLOGY reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Fortescue Metals and BC TECHNOLOGY

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

The idea behind Fortescue Metals Group and BC TECHNOLOGY GROUP 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.