Correlation Between Flexsteel Industries and JAKKS Pacific

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

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

Diversification Opportunities for Flexsteel Industries and JAKKS Pacific

0.58

Correlation Coefficient

Flexsteel Industries  JAKKS Pacific

Very weak diversification

The 3 months correlation between Flexsteel and JAKKS is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Flexsteel Industries and JAKKS Pacific in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on JAKKS Pacific and Flexsteel Industries 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 Flexsteel Industries are associated (or correlated) with JAKKS Pacific. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of JAKKS Pacific has no effect on the direction of Flexsteel Industries i.e., Flexsteel Industries and JAKKS Pacific go up and down completely randomly.

Pair Corralation between Flexsteel Industries and JAKKS Pacific

Given the investment horizon of 90 days Flexsteel Industries is expected to under-perform the JAKKS Pacific. In addition to that, Flexsteel Industries is 1.21 times more volatile than JAKKS Pacific. It trades about -0.32 of its total potential returns per unit of risk. JAKKS Pacific is currently generating about 0.09 per unit of volatility. If you would invest  2,763  in JAKKS Pacific on October 9, 2024 and sell it today you would earn a total of  89.00  from holding JAKKS Pacific or generate 3.22% return on investment over 90 days.

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

Flexsteel Industries  vs.  JAKKS Pacific

Flexsteel Industries

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Flexsteel Industries are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Flexsteel Industries unveiled solid returns over the last few months and may actually be approaching a breakup point.

JAKKS Pacific

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in JAKKS Pacific are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite quite weak forward-looking signals, JAKKS Pacific disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Flexsteel Industries and JAKKS Pacific

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

The idea behind Flexsteel Industries and JAKKS Pacific 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.