Correlation Between Flowserve and XCHG Limited

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

By analyzing existing cross correlation between Flowserve and XCHG Limited American, you can compare the effects of market volatilities on Flowserve and XCHG Limited 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 XCHG Limited. Check out your portfolio center. Please also check ongoing floating volatility patterns of Flowserve and XCHG Limited.

Diversification Opportunities for Flowserve and XCHG Limited

-0.33

Correlation Coefficient

Flowserve  XCHG Limited

Very good diversification

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

Pair Corralation between Flowserve and XCHG Limited

Considering the 90-day investment horizon Flowserve is expected to generate 0.21 times more return on investment than XCHG Limited. However, Flowserve is 4.72 times less risky than XCHG Limited. It trades about 0.52 of its potential returns per unit of risk. XCHG Limited American is currently generating about -0.38 per unit of risk. If you would invest  5,788  in Flowserve on October 24, 2024 and sell it today you would earn a total of  687.00  from holding Flowserve or generate 11.87% return on investment over 90 days.

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

Flowserve  vs.  XCHG Limited American

Flowserve

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Flowserve are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak essential indicators, Flowserve unveiled solid returns over the last few months and may actually be approaching a breakup point.

XCHG Limited American

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days XCHG Limited American has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's fundamental indicators remain fairly strong which may send shares a bit higher in February 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Pair Trading with Flowserve and XCHG Limited

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

The idea behind Flowserve and XCHG Limited American 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.