Correlation Between PARKEN Sport and FLSmidth

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

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

Diversification Opportunities for PARKEN Sport and FLSmidth

0.36

Correlation Coefficient

PARKEN Sport  FLSmidth

Weak diversification

The 3 months correlation between PARKEN and FLSmidth is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding PARKEN Sport Entertainment and FLSmidth Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FLSmidth and PARKEN Sport 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 PARKEN Sport Entertainment 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 PARKEN Sport i.e., PARKEN Sport and FLSmidth go up and down completely randomly.

Pair Corralation between PARKEN Sport and FLSmidth

Assuming the 90 days trading horizon PARKEN Sport is expected to generate 2.61 times less return on investment than FLSmidth. In addition to that, PARKEN Sport is 1.7 times more volatile than FLSmidth Co. It trades about 0.04 of its total potential returns per unit of risk. FLSmidth Co is currently generating about 0.16 per unit of volatility. If you would invest  32,600  in FLSmidth Co on September 4, 2024 and sell it today you would earn a total of  5,500  from holding FLSmidth Co or generate 16.87% return on investment over 90 days.

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

PARKEN Sport Entertainment  vs.  FLSmidth Co

PARKEN Sport Enterta

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in PARKEN Sport Entertainment are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, PARKEN Sport is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

FLSmidth

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in FLSmidth Co are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, FLSmidth displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with PARKEN Sport and FLSmidth

The main advantage of trading using opposite PARKEN Sport and FLSmidth positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PARKEN Sport 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 PARKEN Sport Entertainment 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.

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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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.