Correlation Between FLOW TRADERS and VULCAN MATERIALS

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

Diversification Opportunities for FLOW TRADERS and VULCAN MATERIALS

0.46

Correlation Coefficient

FLOW TRADERS  VULCAN MATERIALS

Very weak diversification

The 3 months correlation between FLOW and VULCAN is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding FLOW TRADERS LTD and VULCAN MATERIALS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VULCAN MATERIALS 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 VULCAN MATERIALS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VULCAN MATERIALS has no effect on the direction of FLOW TRADERS i.e., FLOW TRADERS and VULCAN MATERIALS go up and down completely randomly.

Pair Corralation between FLOW TRADERS and VULCAN MATERIALS

Assuming the 90 days horizon FLOW TRADERS LTD is expected to generate 0.96 times more return on investment than VULCAN MATERIALS. However, FLOW TRADERS LTD is 1.04 times less risky than VULCAN MATERIALS. It trades about 0.13 of its potential returns per unit of risk. VULCAN MATERIALS is currently generating about -0.29 per unit of risk. If you would invest  2,078  in FLOW TRADERS LTD on October 5, 2024 and sell it today you would earn a total of  66.00  from holding FLOW TRADERS LTD or generate 3.18% return on investment over 90 days.

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

FLOW TRADERS LTD  vs.  VULCAN MATERIALS

FLOW TRADERS LTD

Risk-Adjusted Performance

0 of 100

OK

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

VULCAN MATERIALS

Risk-Adjusted Performance

0 of 100

OK

Over the last 90 days VULCAN MATERIALS has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively uncertain basic indicators, VULCAN MATERIALS unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with FLOW TRADERS and VULCAN MATERIALS

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

The idea behind FLOW TRADERS LTD and VULCAN MATERIALS 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.