Correlation Between Flexible Solutions and Cabot

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

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

Diversification Opportunities for Flexible Solutions and Cabot

-0.57

Correlation Coefficient

Flexible Solutions  Cabot

Excellent diversification

The 3 months correlation between Flexible and Cabot is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding Flexible Solutions Internation and Cabot in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cabot and Flexible Solutions 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 Flexible Solutions International are associated (or correlated) with Cabot. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cabot has no effect on the direction of Flexible Solutions i.e., Flexible Solutions and Cabot go up and down completely randomly.

Pair Corralation between Flexible Solutions and Cabot

Considering the 90-day investment horizon Flexible Solutions International is expected to generate 4.91 times more return on investment than Cabot. However, Flexible Solutions is 4.91 times more volatile than Cabot. It trades about 0.11 of its potential returns per unit of risk. Cabot is currently generating about -0.24 per unit of risk. If you would invest  415.00  in Flexible Solutions International on November 28, 2024 and sell it today you would earn a total of  185.00  from holding Flexible Solutions International or generate 44.58% return on investment over 90 days.

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

Flexible Solutions Internation  vs.  Cabot

Flexible Solutions

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Flexible Solutions International are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite fairly unsteady basic indicators, Flexible Solutions demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Cabot

Risk-Adjusted Performance

Very Weak

Over the last 90 days Cabot has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's fundamental drivers remain comparatively stable which may send shares a bit higher in March 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Flexible Solutions and Cabot

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

The idea behind Flexible Solutions International and Cabot 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.