Correlation Between Flow Traders and Rieter Holding

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

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

Diversification Opportunities for Flow Traders and Rieter Holding

-0.25

Correlation Coefficient

Flow Traders  Rieter Holding

Very good diversification

The 3 months correlation between Flow and Rieter is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding Flow Traders BV and Rieter Holding AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rieter Holding AG and Flow Traders 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 Traders BV are associated (or correlated) with Rieter Holding. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rieter Holding AG has no effect on the direction of Flow Traders i.e., Flow Traders and Rieter Holding go up and down completely randomly.

Pair Corralation between Flow Traders and Rieter Holding

Assuming the 90 days trading horizon Flow Traders BV is expected to generate 0.87 times more return on investment than Rieter Holding. However, Flow Traders BV is 1.14 times less risky than Rieter Holding. It trades about 0.19 of its potential returns per unit of risk. Rieter Holding AG is currently generating about -0.06 per unit of risk. If you would invest  2,146  in Flow Traders BV on December 30, 2024 and sell it today you would earn a total of  594.00  from holding Flow Traders BV or generate 27.68% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	96.92%
Values	Daily Returns

Flow Traders BV  vs.  Rieter Holding AG

Flow Traders BV

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Flow Traders BV 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.

Rieter Holding AG

Risk-Adjusted Performance

Very Weak

Over the last 90 days Rieter Holding AG has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Pair Trading with Flow Traders and Rieter Holding

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

The idea behind Flow Traders BV and Rieter Holding AG 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.