Correlation Between FLSmidth and GN Store

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

By analyzing existing cross correlation between FLSmidth Co and GN Store Nord, you can compare the effects of market volatilities on FLSmidth and GN Store 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 GN Store. Check out your portfolio center. Please also check ongoing floating volatility patterns of FLSmidth and GN Store.

Diversification Opportunities for FLSmidth and GN Store

-0.74

Correlation Coefficient

FLSmidth  GN Store

Pay attention - limited upside

The 3 months correlation between FLSmidth and GN Store is -0.74. Overlapping area represents the amount of risk that can be diversified away by holding FLSmidth Co and GN Store Nord in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GN Store Nord 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 GN Store. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GN Store Nord has no effect on the direction of FLSmidth i.e., FLSmidth and GN Store go up and down completely randomly.

Pair Corralation between FLSmidth and GN Store

Assuming the 90 days trading horizon FLSmidth Co is expected to generate 0.77 times more return on investment than GN Store. However, FLSmidth Co is 1.3 times less risky than GN Store. It trades about 0.11 of its potential returns per unit of risk. GN Store Nord is currently generating about -0.1 per unit of risk. If you would invest  34,280  in FLSmidth Co on August 31, 2024 and sell it today you would earn a total of  3,800  from holding FLSmidth Co or generate 11.09% return on investment over 90 days.

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

FLSmidth Co  vs.  GN Store Nord

FLSmidth

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in FLSmidth Co are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, FLSmidth may actually be approaching a critical reversion point that can send shares even higher in December 2024.

GN Store Nord

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days GN Store Nord 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 GN Store

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

The idea behind FLSmidth Co and GN Store Nord 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 Stocks Directory module to find actively traded stocks across global markets.