Correlation Between FLSmidth and Glunz Jensen

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

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

Diversification Opportunities for FLSmidth and Glunz Jensen

0.11

Correlation Coefficient

FLSmidth  Glunz Jensen

Average diversification

The 3 months correlation between FLSmidth and Glunz is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding FLSmidth Co and Glunz Jensen in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Glunz Jensen and FLSmidth 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 FLSmidth Co are associated (or correlated) with Glunz Jensen. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Glunz Jensen has no effect on the direction of FLSmidth i.e., FLSmidth and Glunz Jensen go up and down completely randomly.

Pair Corralation between FLSmidth and Glunz Jensen

Assuming the 90 days trading horizon FLSmidth Co is expected to generate 0.8 times more return on investment than Glunz Jensen. However, FLSmidth Co is 1.24 times less risky than Glunz Jensen. It trades about -0.01 of its potential returns per unit of risk. Glunz Jensen is currently generating about -0.04 per unit of risk. If you would invest  35,600  in FLSmidth Co on December 30, 2024 and sell it today you would lose (940.00) from holding FLSmidth Co or give up 2.64% of portfolio value over 90 days.

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

FLSmidth Co  vs.  Glunz Jensen

FLSmidth

Risk-Adjusted Performance

Very Weak

Over the last 90 days FLSmidth Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, FLSmidth is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Glunz Jensen

Risk-Adjusted Performance

Very Weak

Over the last 90 days Glunz Jensen has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's fundamental indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with FLSmidth and Glunz Jensen

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

The idea behind FLSmidth Co and Glunz Jensen 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.