Correlation Between Flow Capital and Agronomics

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

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

Diversification Opportunities for Flow Capital and Agronomics

-0.61

Correlation Coefficient

Flow Capital  Agronomics

Excellent diversification

The 3 months correlation between Flow and Agronomics is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding Flow Capital Corp and Agronomics Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Agronomics Limited and Flow Capital 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 Capital Corp are associated (or correlated) with Agronomics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Agronomics Limited has no effect on the direction of Flow Capital i.e., Flow Capital and Agronomics go up and down completely randomly.

Pair Corralation between Flow Capital and Agronomics

Assuming the 90 days horizon Flow Capital Corp is expected to generate 0.25 times more return on investment than Agronomics. However, Flow Capital Corp is 3.98 times less risky than Agronomics. It trades about 0.13 of its potential returns per unit of risk. Agronomics Limited is currently generating about -0.02 per unit of risk. If you would invest  51.00  in Flow Capital Corp on August 31, 2024 and sell it today you would earn a total of  10.00  from holding Flow Capital Corp or generate 19.61% return on investment over 90 days.

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

Flow Capital Corp  vs.  Agronomics Limited

Flow Capital Corp

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Flow Capital Corp are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile fundamental indicators, Flow Capital reported solid returns over the last few months and may actually be approaching a breakup point.

Agronomics Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Agronomics Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's primary indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Flow Capital and Agronomics

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

The idea behind Flow Capital Corp and Agronomics Limited 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.