Correlation Between FEC Resources and Laredo Oil

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

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

Diversification Opportunities for FEC Resources and Laredo Oil

0.01

Correlation Coefficient

FEC Resources  Laredo Oil

Significant diversification

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

Pair Corralation between FEC Resources and Laredo Oil

Assuming the 90 days horizon FEC Resources is expected to generate 7.8 times more return on investment than Laredo Oil. However, FEC Resources is 7.8 times more volatile than Laredo Oil. It trades about 0.18 of its potential returns per unit of risk. Laredo Oil is currently generating about 0.13 per unit of risk. If you would invest  0.16  in FEC Resources on May 22, 2025 and sell it today you would earn a total of  0.04  from holding FEC Resources or generate 25.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.39%
Values	Daily Returns

FEC Resources  vs.  Laredo Oil

FEC Resources

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in FEC Resources are ranked lower than 13 (%) 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.

Laredo Oil

Risk-Adjusted Performance

Fair

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

Pair Trading with FEC Resources and Laredo Oil

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

The idea behind FEC Resources and Laredo Oil 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.