Correlation Between Flow Beverage and Suntory Beverage

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

Diversification Opportunities for Flow Beverage and Suntory Beverage

0.43

Correlation Coefficient

Flow Beverage  Suntory Beverage

Very weak diversification

The 3 months correlation between Flow and Suntory is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Flow Beverage Corp and Suntory Beverage Food in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Suntory Beverage Food 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 Suntory Beverage. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Suntory Beverage Food has no effect on the direction of Flow Beverage i.e., Flow Beverage and Suntory Beverage go up and down completely randomly.

Pair Corralation between Flow Beverage and Suntory Beverage

Assuming the 90 days horizon Flow Beverage Corp is expected to under-perform the Suntory Beverage. In addition to that, Flow Beverage is 4.93 times more volatile than Suntory Beverage Food. It trades about -0.04 of its total potential returns per unit of risk. Suntory Beverage Food is currently generating about -0.12 per unit of volatility. If you would invest  1,844  in Suntory Beverage Food on August 31, 2024 and sell it today you would lose (189.00) from holding Suntory Beverage Food or give up 10.25% of portfolio value over 90 days.

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

Flow Beverage Corp  vs.  Suntory Beverage Food

Flow Beverage Corp

Risk-Adjusted Performance

0 of 100

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 inconsistent performance in the last few months, the Stock's fundamental drivers remain nearly stable which may send shares a bit higher in December 2024. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Suntory Beverage Food

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Suntory Beverage Food has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest inconsistent performance, the Stock's technical and fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Flow Beverage and Suntory Beverage

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

The idea behind Flow Beverage Corp and Suntory Beverage Food 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.