Correlation Between Tradeweb Markets and FLOW TRADERS

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

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

Diversification Opportunities for Tradeweb Markets and FLOW TRADERS

0.89

Correlation Coefficient

Tradeweb Markets  FLOW TRADERS

Very poor diversification

The 3 months correlation between Tradeweb and FLOW is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Tradeweb Markets 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 Tradeweb Markets 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 Tradeweb Markets 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 Tradeweb Markets i.e., Tradeweb Markets and FLOW TRADERS go up and down completely randomly.

Pair Corralation between Tradeweb Markets and FLOW TRADERS

Assuming the 90 days horizon Tradeweb Markets is expected to generate 1.43 times more return on investment than FLOW TRADERS. However, Tradeweb Markets is 1.43 times more volatile than FLOW TRADERS LTD. It trades about 0.14 of its potential returns per unit of risk. FLOW TRADERS LTD is currently generating about 0.1 per unit of risk. If you would invest  12,091  in Tradeweb Markets on September 16, 2024 and sell it today you would earn a total of  609.00  from holding Tradeweb Markets or generate 5.04% return on investment over 90 days.

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

Tradeweb Markets  vs.  FLOW TRADERS LTD

Tradeweb Markets

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Tradeweb Markets are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Tradeweb Markets reported solid returns over the last few months and may actually be approaching a breakup point.

FLOW TRADERS LTD

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in FLOW TRADERS LTD are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, FLOW TRADERS reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Tradeweb Markets and FLOW TRADERS

The main advantage of trading using opposite Tradeweb Markets and FLOW TRADERS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tradeweb Markets 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 Tradeweb Markets 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.