Correlation Between FEC Resources and Arete Industries

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

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

Diversification Opportunities for FEC Resources and Arete Industries

-0.03

Correlation Coefficient

FEC Resources  Arete Industries

Good diversification

The 3 months correlation between FEC and Arete is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding FEC Resources and Arete Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arete Industries and FEC Resources 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 FEC Resources are associated (or correlated) with Arete Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Arete Industries has no effect on the direction of FEC Resources i.e., FEC Resources and Arete Industries go up and down completely randomly.

Pair Corralation between FEC Resources and Arete Industries

Assuming the 90 days horizon FEC Resources is expected to generate 2.03 times more return on investment than Arete Industries. However, FEC Resources is 2.03 times more volatile than Arete Industries. It trades about 0.15 of its potential returns per unit of risk. Arete Industries is currently generating about 0.08 per unit of risk. If you would invest  0.16  in FEC Resources on May 4, 2025 and sell it today you would lose (0.05) from holding FEC Resources or give up 31.25% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

FEC Resources  vs.  Arete Industries

FEC Resources

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in FEC Resources are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, FEC Resources reported solid returns over the last few months and may actually be approaching a breakup point.

Arete Industries

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Arete Industries are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile technical and fundamental indicators, Arete Industries unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with FEC Resources and Arete Industries

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

The idea behind FEC Resources and Arete Industries 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.