Correlation Between Timken and Fluent

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

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

Diversification Opportunities for Timken and Fluent

0.6

Correlation Coefficient

Timken  Fluent

Poor diversification

The 3 months correlation between Timken and Fluent is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Timken Company and Fluent Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fluent Inc and Timken 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 Timken Company are associated (or correlated) with Fluent. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fluent Inc has no effect on the direction of Timken i.e., Timken and Fluent go up and down completely randomly.

Pair Corralation between Timken and Fluent

Considering the 90-day investment horizon Timken is expected to generate 1.01 times less return on investment than Fluent. But when comparing it to its historical volatility, Timken Company is 1.9 times less risky than Fluent. It trades about 0.22 of its potential returns per unit of risk. Fluent Inc is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  267.00  in Fluent Inc on October 26, 2024 and sell it today you would earn a total of  16.00  from holding Fluent Inc or generate 5.99% return on investment over 90 days.

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

Timken Company  vs.  Fluent Inc

Timken Company

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Timken Company has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest unsteady performance, the Stock's forward-looking signals remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

Fluent Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Fluent Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Fluent is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Timken and Fluent

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

The idea behind Timken Company and Fluent Inc 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.

Check out your portfolio center.

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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.