Correlation Between Graham Holdings and Flex

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

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

Diversification Opportunities for Graham Holdings and Flex

0.78

Correlation Coefficient

Graham Holdings  Flex

Poor diversification

The 3 months correlation between Graham and Flex is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Graham Holdings Co and Flex in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Flex and Graham Holdings 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 Graham Holdings Co are associated (or correlated) with Flex. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Flex has no effect on the direction of Graham Holdings i.e., Graham Holdings and Flex go up and down completely randomly.

Pair Corralation between Graham Holdings and Flex

Considering the 90-day investment horizon Graham Holdings Co is expected to under-perform the Flex. But the stock apears to be less risky and, when comparing its historical volatility, Graham Holdings Co is 1.17 times less risky than Flex. The stock trades about -0.14 of its potential returns per unit of risk. The Flex is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  3,904  in Flex on October 11, 2024 and sell it today you would earn a total of  202.00  from holding Flex or generate 5.17% return on investment over 90 days.

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

Graham Holdings Co  vs.  Flex

Graham Holdings

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Graham Holdings Co are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating technical indicators, Graham Holdings may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Flex

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Flex are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating technical and fundamental indicators, Flex showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Graham Holdings and Flex

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

The idea behind Graham Holdings Co and Flex 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.