Correlation Between Flexsteel Industries and Northann Corp

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

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

Diversification Opportunities for Flexsteel Industries and Northann Corp

0.74

Correlation Coefficient

Flexsteel Industries  Northann Corp

Poor diversification

The 3 months correlation between Flexsteel and Northann is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Flexsteel Industries and Northann Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Northann Corp 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 Northann Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Northann Corp has no effect on the direction of Flexsteel Industries i.e., Flexsteel Industries and Northann Corp go up and down completely randomly.

Pair Corralation between Flexsteel Industries and Northann Corp

Given the investment horizon of 90 days Flexsteel Industries is expected to under-perform the Northann Corp. But the stock apears to be less risky and, when comparing its historical volatility, Flexsteel Industries is 3.17 times less risky than Northann Corp. The stock trades about -0.06 of its potential returns per unit of risk. The Northann Corp is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  25.00  in Northann Corp on September 27, 2024 and sell it today you would earn a total of  0.38  from holding Northann Corp or generate 1.52% return on investment over 90 days.

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

Flexsteel Industries  vs.  Northann Corp

Flexsteel Industries

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Flexsteel Industries are ranked lower than 9 (%) 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.

Northann Corp

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Northann Corp are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite quite unfluctuating fundamental indicators, Northann Corp disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Flexsteel Industries and Northann Corp

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

The idea behind Flexsteel Industries and Northann Corp 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.