Correlation Between FLSmidth and ISS AS

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

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

Diversification Opportunities for FLSmidth and ISS AS

0.0

Correlation Coefficient

FLSmidth  ISS AS

Pay attention - limited upside

The 3 months correlation between FLSmidth and ISS is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding FLSmidth Co and ISS AS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ISS AS 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 ISS AS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ISS AS has no effect on the direction of FLSmidth i.e., FLSmidth and ISS AS go up and down completely randomly.

Pair Corralation between FLSmidth and ISS AS

Assuming the 90 days trading horizon FLSmidth Co is expected to under-perform the ISS AS. But the stock apears to be less risky and, when comparing its historical volatility, FLSmidth Co is 1.03 times less risky than ISS AS. The stock trades about -0.01 of its potential returns per unit of risk. The ISS AS is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  13,130  in ISS AS on December 30, 2024 and sell it today you would earn a total of  2,990  from holding ISS AS or generate 22.77% return on investment over 90 days.

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

FLSmidth Co  vs.  ISS AS

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.

ISS AS

Risk-Adjusted Performance

Good

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

Pair Trading with FLSmidth and ISS AS

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

The idea behind FLSmidth Co and ISS AS 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.