Correlation Between Flow Capital and North American

Can any of the company-specific risk be diversified away by investing in both Flow Capital and North American 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 North American 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 North American Financial, you can compare the effects of market volatilities on Flow Capital and North American 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 North American. Check out your portfolio center. Please also check ongoing floating volatility patterns of Flow Capital and North American.

Diversification Opportunities for Flow Capital and North American

0.52

Correlation Coefficient

Flow Capital  North American

Very weak diversification

The 3 months correlation between Flow and North is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Flow Capital Corp and North American Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on North American Financial 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 North American. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of North American Financial has no effect on the direction of Flow Capital i.e., Flow Capital and North American go up and down completely randomly.

Pair Corralation between Flow Capital and North American

Assuming the 90 days horizon Flow Capital Corp is expected to under-perform the North American. But the pink sheet apears to be less risky and, when comparing its historical volatility, Flow Capital Corp is 1.64 times less risky than North American. The pink sheet trades about -0.13 of its potential returns per unit of risk. The North American Financial is currently generating about -0.05 of returns per unit of risk over similar time horizon. If you would invest  477.00  in North American Financial on December 28, 2024 and sell it today you would lose (37.00) from holding North American Financial or give up 7.76% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	80.0%
Values	Daily Returns

Flow Capital Corp  vs.  North American Financial

Flow Capital Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Flow Capital Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's fundamental indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

North American Financial

Risk-Adjusted Performance

Very Weak

Over the last 90 days North American Financial has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic 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 North American

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

The idea behind Flow Capital Corp and North American Financial 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.