Correlation Between Capital Metals and Flow Traders

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

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

Diversification Opportunities for Capital Metals and Flow Traders

-0.04

Correlation Coefficient

Capital Metals  Flow Traders

Good diversification

The 3 months correlation between Capital and Flow is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding Capital Metals PLC and Flow Traders NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Flow Traders NV and Capital Metals 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 Capital Metals PLC 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 NV has no effect on the direction of Capital Metals i.e., Capital Metals and Flow Traders go up and down completely randomly.

Pair Corralation between Capital Metals and Flow Traders

Assuming the 90 days trading horizon Capital Metals is expected to generate 1.22 times less return on investment than Flow Traders. In addition to that, Capital Metals is 1.63 times more volatile than Flow Traders NV. It trades about 0.1 of its total potential returns per unit of risk. Flow Traders NV is currently generating about 0.2 per unit of volatility. If you would invest  2,148  in Flow Traders NV on December 24, 2024 and sell it today you would earn a total of  592.00  from holding Flow Traders NV or generate 27.56% return on investment over 90 days.

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

Capital Metals PLC  vs.  Flow Traders NV

Capital Metals PLC

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Capital Metals PLC are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Capital Metals unveiled solid returns over the last few months and may actually be approaching a breakup point.

Flow Traders NV

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Flow Traders NV are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Flow Traders unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Capital Metals and Flow Traders

The main advantage of trading using opposite Capital Metals and Flow Traders positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Capital Metals 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' long position.

The idea behind Capital Metals PLC and Flow Traders NV 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.