Correlation Between Flow Traders and FinecoBank SpA

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

By analyzing existing cross correlation between Flow Traders NV and FinecoBank SpA, you can compare the effects of market volatilities on Flow Traders and FinecoBank SpA 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 Flow Traders with a short position of FinecoBank SpA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Flow Traders and FinecoBank SpA.

Diversification Opportunities for Flow Traders and FinecoBank SpA

0.78

Correlation Coefficient

Flow Traders  FinecoBank SpA

Poor diversification

The 3 months correlation between Flow and FinecoBank is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Flow Traders NV and FinecoBank SpA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FinecoBank SpA and Flow Traders 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 Flow Traders NV are associated (or correlated) with FinecoBank SpA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FinecoBank SpA has no effect on the direction of Flow Traders i.e., Flow Traders and FinecoBank SpA go up and down completely randomly.

Pair Corralation between Flow Traders and FinecoBank SpA

Assuming the 90 days trading horizon Flow Traders is expected to generate 1.6 times less return on investment than FinecoBank SpA. In addition to that, Flow Traders is 1.09 times more volatile than FinecoBank SpA. It trades about 0.12 of its total potential returns per unit of risk. FinecoBank SpA is currently generating about 0.21 per unit of volatility. If you would invest  1,507  in FinecoBank SpA on October 25, 2024 and sell it today you would earn a total of  303.00  from holding FinecoBank SpA or generate 20.11% return on investment over 90 days.

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

Flow Traders NV  vs.  FinecoBank SpA

Flow Traders NV

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Flow Traders NV are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Flow Traders may actually be approaching a critical reversion point that can send shares even higher in February 2025.

FinecoBank SpA

Risk-Adjusted Performance

16 of 100

Solid

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

Pair Trading with Flow Traders and FinecoBank SpA

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

The idea behind Flow Traders NV and FinecoBank SpA 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.