Correlation Between Flex and Allient

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

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

Diversification Opportunities for Flex and Allient

0.81

Correlation Coefficient

Flex  Allient

Very poor diversification

The 3 months correlation between Flex and Allient is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Flex and Allient in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Allient and Flex 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 Flex are associated (or correlated) with Allient. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Allient has no effect on the direction of Flex i.e., Flex and Allient go up and down completely randomly.

Pair Corralation between Flex and Allient

Given the investment horizon of 90 days Flex is expected to generate 0.66 times more return on investment than Allient. However, Flex is 1.53 times less risky than Allient. It trades about -0.15 of its potential returns per unit of risk. Allient is currently generating about -0.12 per unit of risk. If you would invest  4,107  in Flex on September 25, 2024 and sell it today you would lose (192.00) from holding Flex or give up 4.67% of portfolio value over 90 days.

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

Flex  vs.  Allient

Flex

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Flex are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating technical and fundamental indicators, Flex showed solid returns over the last few months and may actually be approaching a breakup point.

Allient

Risk-Adjusted Performance

11 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Allient are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Allient unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Flex and Allient

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

The idea behind Flex and Allient 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.