Correlation Between Matas AS and FLSmidth

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

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

Diversification Opportunities for Matas AS and FLSmidth

0.73

Correlation Coefficient

Matas AS  FLSmidth

Poor diversification

The 3 months correlation between Matas and FLSmidth is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Matas AS and FLSmidth Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FLSmidth and Matas AS 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 Matas AS are associated (or correlated) with FLSmidth. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FLSmidth has no effect on the direction of Matas AS i.e., Matas AS and FLSmidth go up and down completely randomly.

Pair Corralation between Matas AS and FLSmidth

Assuming the 90 days trading horizon Matas AS is expected to generate 0.71 times more return on investment than FLSmidth. However, Matas AS is 1.4 times less risky than FLSmidth. It trades about -0.01 of its potential returns per unit of risk. FLSmidth Co is currently generating about -0.01 per unit of risk. If you would invest  13,540  in Matas AS on December 30, 2024 and sell it today you would lose (200.00) from holding Matas AS or give up 1.48% of portfolio value over 90 days.

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

Matas AS  vs.  FLSmidth Co

Matas AS

Risk-Adjusted Performance

Very Weak

Over the last 90 days Matas AS has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound fundamental indicators, Matas AS is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

FLSmidth

Risk-Adjusted Performance

Very Weak

Over the last 90 days FLSmidth Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, FLSmidth is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Matas AS and FLSmidth

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

The idea behind Matas AS and FLSmidth Co 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.

Check out your portfolio center.

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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.