Correlation Between Flowserve and Donaldson

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

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

Diversification Opportunities for Flowserve and Donaldson

0.47

Correlation Coefficient

Flowserve  Donaldson

Very weak diversification

The 3 months correlation between Flowserve and Donaldson is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Flowserve and Donaldson in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Donaldson and Flowserve 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 Flowserve are associated (or correlated) with Donaldson. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Donaldson has no effect on the direction of Flowserve i.e., Flowserve and Donaldson go up and down completely randomly.

Pair Corralation between Flowserve and Donaldson

Considering the 90-day investment horizon Flowserve is expected to under-perform the Donaldson. In addition to that, Flowserve is 1.84 times more volatile than Donaldson. It trades about -0.1 of its total potential returns per unit of risk. Donaldson is currently generating about 0.01 per unit of volatility. If you would invest  6,702  in Donaldson on December 30, 2024 and sell it today you would earn a total of  5.00  from holding Donaldson or generate 0.07% return on investment over 90 days.

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

Flowserve  vs.  Donaldson

Flowserve

Risk-Adjusted Performance

Very Weak

Over the last 90 days Flowserve has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's essential indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Donaldson

Risk-Adjusted Performance

Very Weak

Over the last 90 days Donaldson has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong fundamental indicators, Donaldson is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Flowserve and Donaldson

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

The idea behind Flowserve and Donaldson 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..