Correlation Between Middleby Corp and Flowserve

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

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

Diversification Opportunities for Middleby Corp and Flowserve

0.05

Correlation Coefficient

Middleby Corp  Flowserve

Significant diversification

The 3 months correlation between Middleby and Flowserve is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding Middleby Corp and Flowserve in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Flowserve and Middleby Corp 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 Middleby Corp are associated (or correlated) with Flowserve. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Flowserve has no effect on the direction of Middleby Corp i.e., Middleby Corp and Flowserve go up and down completely randomly.

Pair Corralation between Middleby Corp and Flowserve

Given the investment horizon of 90 days Middleby Corp is expected to generate 1.11 times more return on investment than Flowserve. However, Middleby Corp is 1.11 times more volatile than Flowserve. It trades about 0.09 of its potential returns per unit of risk. Flowserve is currently generating about -0.1 per unit of risk. If you would invest  13,559  in Middleby Corp on December 30, 2024 and sell it today you would earn a total of  1,717  from holding Middleby Corp or generate 12.66% return on investment over 90 days.

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

Middleby Corp  vs.  Flowserve

Middleby Corp

Risk-Adjusted Performance

OK

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

Flowserve

Risk-Adjusted Performance

Very Weak

Over the last 90 days Flowserve 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 essential indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Middleby Corp and Flowserve

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

The idea behind Middleby Corp and Flowserve 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.