Correlation Between Flux Power and Exro Technologies

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

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

Diversification Opportunities for Flux Power and Exro Technologies

0.48

Correlation Coefficient

Flux Power  Exro Technologies

Very weak diversification

The 3 months correlation between Flux and Exro is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Flux Power Holdings and Exro Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Exro Technologies and Flux Power 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 Flux Power Holdings are associated (or correlated) with Exro Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Exro Technologies has no effect on the direction of Flux Power i.e., Flux Power and Exro Technologies go up and down completely randomly.

Pair Corralation between Flux Power and Exro Technologies

Given the investment horizon of 90 days Flux Power Holdings is expected to generate 1.09 times more return on investment than Exro Technologies. However, Flux Power is 1.09 times more volatile than Exro Technologies. It trades about 0.08 of its potential returns per unit of risk. Exro Technologies is currently generating about -0.02 per unit of risk. If you would invest  168.00  in Flux Power Holdings on December 28, 2024 and sell it today you would earn a total of  35.00  from holding Flux Power Holdings or generate 20.83% return on investment over 90 days.

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

Flux Power Holdings  vs.  Exro Technologies

Flux Power Holdings

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Flux Power Holdings are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Flux Power showed solid returns over the last few months and may actually be approaching a breakup point.

Exro Technologies

Risk-Adjusted Performance

Very Weak

Over the last 90 days Exro Technologies has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Flux Power and Exro Technologies

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

The idea behind Flux Power Holdings and Exro Technologies 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.