Correlation Between Flow Beverage and Planting Hope

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

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

Diversification Opportunities for Flow Beverage and Planting Hope

-0.22

Correlation Coefficient

Flow Beverage  Planting Hope

Very good diversification

The 3 months correlation between Flow and Planting is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding Flow Beverage Corp and The Planting Hope in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Planting Hope and Flow Beverage 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 Flow Beverage Corp are associated (or correlated) with Planting Hope. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Planting Hope has no effect on the direction of Flow Beverage i.e., Flow Beverage and Planting Hope go up and down completely randomly.

Pair Corralation between Flow Beverage and Planting Hope

Assuming the 90 days horizon Flow Beverage is expected to generate 282.82 times less return on investment than Planting Hope. But when comparing it to its historical volatility, Flow Beverage Corp is 13.3 times less risky than Planting Hope. It trades about 0.01 of its potential returns per unit of risk. The Planting Hope is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  0.01  in The Planting Hope on December 21, 2024 and sell it today you would earn a total of  1.51  from holding The Planting Hope or generate 15100.0% return on investment over 90 days.

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

Flow Beverage Corp  vs.  The Planting Hope

Flow Beverage Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Flow Beverage Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable fundamental drivers, Flow Beverage is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Planting Hope

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in The Planting Hope are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak forward-looking signals, Planting Hope reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Flow Beverage and Planting Hope

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

The idea behind Flow Beverage Corp and The Planting Hope 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.