Correlation Between Flow Capital and 3i Group

Can any of the company-specific risk be diversified away by investing in both Flow Capital and 3i Group 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 3i Group 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 3i Group plc, you can compare the effects of market volatilities on Flow Capital and 3i Group 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 3i Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Flow Capital and 3i Group.

Diversification Opportunities for Flow Capital and 3i Group

-0.82

Correlation Coefficient

Flow Capital  3i Group

Pay attention - limited upside

The 3 months correlation between Flow and TGOPF is -0.82. Overlapping area represents the amount of risk that can be diversified away by holding Flow Capital Corp and 3i Group plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on 3i Group plc 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 3i Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of 3i Group plc has no effect on the direction of Flow Capital i.e., Flow Capital and 3i Group go up and down completely randomly.

Pair Corralation between Flow Capital and 3i Group

Assuming the 90 days horizon Flow Capital Corp is expected to under-perform the 3i Group. But the pink sheet apears to be less risky and, when comparing its historical volatility, Flow Capital Corp is 1.33 times less risky than 3i Group. The pink sheet trades about -0.13 of its potential returns per unit of risk. The 3i Group plc is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  4,429  in 3i Group plc on December 28, 2024 and sell it today you would earn a total of  524.00  from holding 3i Group plc or generate 11.83% return on investment over 90 days.

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

Flow Capital Corp  vs.  3i Group plc

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.

3i Group plc

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in 3i Group plc are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, 3i Group reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Flow Capital and 3i Group

The main advantage of trading using opposite Flow Capital and 3i Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Flow Capital position performs unexpectedly, 3i Group 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 3i Group will offset losses from the drop in 3i Group's long position.

The idea behind Flow Capital Corp and 3i Group plc 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.