Correlation Between FLSmidth and RIAS AS

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

Diversification Opportunities for FLSmidth and RIAS AS

-0.33

Correlation Coefficient

FLSmidth  RIAS AS

Very good diversification

The 3 months correlation between FLSmidth and RIAS is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding FLSmidth Co and RIAS AS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RIAS 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 RIAS AS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RIAS AS has no effect on the direction of FLSmidth i.e., FLSmidth and RIAS AS go up and down completely randomly.

Pair Corralation between FLSmidth and RIAS AS

Assuming the 90 days trading horizon FLSmidth Co is expected to under-perform the RIAS AS. But the stock apears to be less risky and, when comparing its historical volatility, FLSmidth Co is 2.29 times less risky than RIAS AS. The stock trades about -0.45 of its potential returns per unit of risk. The RIAS AS is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  62,500  in RIAS AS on October 6, 2024 and sell it today you would earn a total of  1,000.00  from holding RIAS AS or generate 1.6% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	94.44%
Values	Daily Returns

FLSmidth Co  vs.  RIAS AS

FLSmidth

Risk-Adjusted Performance

0 of 100

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.

RIAS AS

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days RIAS AS has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, RIAS AS is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with FLSmidth and RIAS AS

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

The idea behind FLSmidth Co and RIAS 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.