Correlation Between FLOW TRADERS and INSURANCE AUST

Can any of the company-specific risk be diversified away by investing in both FLOW TRADERS and INSURANCE AUST 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 INSURANCE AUST 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 INSURANCE AUST GRP, you can compare the effects of market volatilities on FLOW TRADERS and INSURANCE AUST 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 INSURANCE AUST. Check out your portfolio center. Please also check ongoing floating volatility patterns of FLOW TRADERS and INSURANCE AUST.

Diversification Opportunities for FLOW TRADERS and INSURANCE AUST

-0.65

Correlation Coefficient

FLOW TRADERS  INSURANCE AUST

Excellent diversification

The 3 months correlation between FLOW and INSURANCE is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding FLOW TRADERS LTD and INSURANCE AUST GRP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on INSURANCE AUST GRP 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 INSURANCE AUST. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of INSURANCE AUST GRP has no effect on the direction of FLOW TRADERS i.e., FLOW TRADERS and INSURANCE AUST go up and down completely randomly.

Pair Corralation between FLOW TRADERS and INSURANCE AUST

Assuming the 90 days horizon FLOW TRADERS LTD is expected to generate 1.05 times more return on investment than INSURANCE AUST. However, FLOW TRADERS is 1.05 times more volatile than INSURANCE AUST GRP. It trades about 0.15 of its potential returns per unit of risk. INSURANCE AUST GRP is currently generating about -0.07 per unit of risk. If you would invest  2,214  in FLOW TRADERS LTD on December 20, 2024 and sell it today you would earn a total of  490.00  from holding FLOW TRADERS LTD or generate 22.13% return on investment over 90 days.

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

FLOW TRADERS LTD  vs.  INSURANCE AUST GRP

FLOW TRADERS LTD

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in FLOW TRADERS LTD are ranked lower than 12 (%) 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.

INSURANCE AUST GRP

Risk-Adjusted Performance

Very Weak

Over the last 90 days INSURANCE AUST GRP has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's primary indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with FLOW TRADERS and INSURANCE AUST

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

The idea behind FLOW TRADERS LTD and INSURANCE AUST GRP 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 Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.