Correlation Between Flowr Corp and Australis Capital

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

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

Diversification Opportunities for Flowr Corp and Australis Capital

0.0

Correlation Coefficient

Flowr Corp  Australis Capital

Pay attention - limited upside

The 3 months correlation between Flowr and Australis is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Flowr Corp and Australis Capital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Australis Capital and Flowr Corp 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 Flowr Corp are associated (or correlated) with Australis Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Australis Capital has no effect on the direction of Flowr Corp i.e., Flowr Corp and Australis Capital go up and down completely randomly.

Pair Corralation between Flowr Corp and Australis Capital

Assuming the 90 days horizon Flowr Corp is expected to generate 1.08 times less return on investment than Australis Capital. But when comparing it to its historical volatility, Flowr Corp is 1.0 times less risky than Australis Capital. It trades about 0.08 of its potential returns per unit of risk. Australis Capital is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  4.40  in Australis Capital on September 29, 2024 and sell it today you would lose (4.39) from holding Australis Capital or give up 99.77% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	82.66%
Values	Daily Returns

Flowr Corp  vs.  Australis Capital

Flowr Corp

Risk-Adjusted Performance

0 of 100

Very Weak

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

Australis Capital

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Australis Capital 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 basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Flowr Corp and Australis Capital

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

The idea behind Flowr Corp and Australis Capital 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.