Correlation Between Flex and CTS

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

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

Diversification Opportunities for Flex and CTS

0.54

Correlation Coefficient

Flex  CTS

Very weak diversification

The 3 months correlation between Flex and CTS is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Flex and CTS Corp. in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CTS Corporation 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 CTS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CTS Corporation has no effect on the direction of Flex i.e., Flex and CTS go up and down completely randomly.

Pair Corralation between Flex and CTS

Given the investment horizon of 90 days Flex is expected to generate 1.74 times more return on investment than CTS. However, Flex is 1.74 times more volatile than CTS Corporation. It trades about -0.03 of its potential returns per unit of risk. CTS Corporation is currently generating about -0.21 per unit of risk. If you would invest  3,953  in Flex on December 26, 2024 and sell it today you would lose (273.00) from holding Flex or give up 6.91% of portfolio value over 90 days.

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

Flex  vs.  CTS Corp.

Flex

Risk-Adjusted Performance

Very Weak

Over the last 90 days Flex has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong technical and fundamental indicators, Flex is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

CTS Corporation

Risk-Adjusted Performance

Very Weak

Over the last 90 days CTS Corporation has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Flex and CTS

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

The idea behind Flex and CTS Corporation 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.