Correlation Between NEW MILLENNIUM and FLOW TRADERS

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

By analyzing existing cross correlation between NEW MILLENNIUM IRON and FLOW TRADERS LTD, you can compare the effects of market volatilities on NEW MILLENNIUM and FLOW TRADERS 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 NEW MILLENNIUM with a short position of FLOW TRADERS. Check out your portfolio center. Please also check ongoing floating volatility patterns of NEW MILLENNIUM and FLOW TRADERS.

Diversification Opportunities for NEW MILLENNIUM and FLOW TRADERS

-0.09

Correlation Coefficient

NEW MILLENNIUM  FLOW TRADERS

Good diversification

The 3 months correlation between NEW and FLOW is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding NEW MILLENNIUM IRON and FLOW TRADERS LTD in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FLOW TRADERS LTD and NEW MILLENNIUM 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 NEW MILLENNIUM IRON are associated (or correlated) with FLOW TRADERS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FLOW TRADERS LTD has no effect on the direction of NEW MILLENNIUM i.e., NEW MILLENNIUM and FLOW TRADERS go up and down completely randomly.

Pair Corralation between NEW MILLENNIUM and FLOW TRADERS

Assuming the 90 days trading horizon NEW MILLENNIUM IRON is expected to under-perform the FLOW TRADERS. But the stock apears to be less risky and, when comparing its historical volatility, NEW MILLENNIUM IRON is 1.09 times less risky than FLOW TRADERS. The stock trades about -0.04 of its potential returns per unit of risk. The FLOW TRADERS LTD is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  1,846  in FLOW TRADERS LTD on October 4, 2024 and sell it today you would earn a total of  298.00  from holding FLOW TRADERS LTD or generate 16.14% return on investment over 90 days.

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

NEW MILLENNIUM IRON  vs.  FLOW TRADERS LTD

NEW MILLENNIUM IRON

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days NEW MILLENNIUM IRON has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, NEW MILLENNIUM is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

FLOW TRADERS LTD

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in FLOW TRADERS LTD are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, FLOW TRADERS may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with NEW MILLENNIUM and FLOW TRADERS

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

The idea behind NEW MILLENNIUM IRON and FLOW TRADERS LTD 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.