Correlation Between FLSmidth and Matas AS

Can any of the company-specific risk be diversified away by investing in both FLSmidth and Matas 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 Matas 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 Matas AS, you can compare the effects of market volatilities on FLSmidth and Matas 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 Matas AS. Check out your portfolio center. Please also check ongoing floating volatility patterns of FLSmidth and Matas AS.

Diversification Opportunities for FLSmidth and Matas AS

0.73

Correlation Coefficient

FLSmidth  Matas AS

Poor diversification

The 3 months correlation between FLSmidth and Matas is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding FLSmidth Co and Matas AS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Matas 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 Matas AS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Matas AS has no effect on the direction of FLSmidth i.e., FLSmidth and Matas AS go up and down completely randomly.

Pair Corralation between FLSmidth and Matas AS

Assuming the 90 days trading horizon FLSmidth Co is expected to under-perform the Matas AS. In addition to that, FLSmidth is 1.4 times more volatile than Matas AS. It trades about -0.01 of its total potential returns per unit of risk. Matas AS is currently generating about -0.01 per unit of volatility. If you would invest  13,540  in Matas AS on December 30, 2024 and sell it today you would lose (200.00) from holding Matas AS or give up 1.48% of portfolio value over 90 days.

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

FLSmidth Co  vs.  Matas 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.

Matas AS

Risk-Adjusted Performance

Very Weak

Over the last 90 days Matas AS has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound fundamental indicators, Matas AS is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with FLSmidth and Matas AS

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

The idea behind FLSmidth Co and Matas 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.