Correlation Between FLOW TRADERS and Brown Forman

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Can any of the company-specific risk be diversified away by investing in both FLOW TRADERS and Brown Forman 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 FLOW TRADERS and Brown Forman into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between FLOW TRADERS LTD and Brown Forman, you can compare the effects of market volatilities on FLOW TRADERS and Brown Forman 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 FLOW TRADERS with a short position of Brown Forman. Check out your portfolio center. Please also check ongoing floating volatility patterns of FLOW TRADERS and Brown Forman.

Diversification Opportunities for FLOW TRADERS and Brown Forman

-0.09
  Correlation Coefficient

Good diversification

The 3 months correlation between FLOW and Brown is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding FLOW TRADERS LTD and Brown Forman in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Brown Forman and FLOW TRADERS 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 FLOW TRADERS LTD are associated (or correlated) with Brown Forman. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Brown Forman has no effect on the direction of FLOW TRADERS i.e., FLOW TRADERS and Brown Forman go up and down completely randomly.

Pair Corralation between FLOW TRADERS and Brown Forman

Assuming the 90 days horizon FLOW TRADERS is expected to generate 1.91 times less return on investment than Brown Forman. But when comparing it to its historical volatility, FLOW TRADERS LTD is 2.25 times less risky than Brown Forman. It trades about 0.07 of its potential returns per unit of risk. Brown Forman is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  3,760  in Brown Forman on September 22, 2024 and sell it today you would earn a total of  120.00  from holding Brown Forman or generate 3.19% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

FLOW TRADERS LTD  vs.  Brown Forman

 Performance 
       Timeline  
FLOW TRADERS LTD 

Risk-Adjusted Performance

19 of 100

 
Weak
 
Strong
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in FLOW TRADERS LTD are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, FLOW TRADERS reported solid returns over the last few months and may actually be approaching a breakup point.
Brown Forman 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Brown Forman has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Brown Forman is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

FLOW TRADERS and Brown Forman Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with FLOW TRADERS and Brown Forman

The main advantage of trading using opposite FLOW TRADERS and Brown Forman positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if FLOW TRADERS position performs unexpectedly, Brown Forman 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 Brown Forman will offset losses from the drop in Brown Forman's long position.
The idea behind FLOW TRADERS LTD and Brown Forman 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.

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