Correlation Between Timken and Flexible Solutions

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

By analyzing existing cross correlation between Timken Company and Flexible Solutions International, you can compare the effects of market volatilities on Timken and Flexible Solutions 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 Flexible Solutions. Check out your portfolio center. Please also check ongoing floating volatility patterns of Timken and Flexible Solutions.

Diversification Opportunities for Timken and Flexible Solutions

-0.05

Correlation Coefficient

Timken  Flexible Solutions

Good diversification

The 3 months correlation between Timken and Flexible is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding Timken Company and Flexible Solutions Internation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Flexible Solutions 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 Flexible Solutions. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Flexible Solutions has no effect on the direction of Timken i.e., Timken and Flexible Solutions go up and down completely randomly.

Pair Corralation between Timken and Flexible Solutions

Considering the 90-day investment horizon Timken Company is expected to under-perform the Flexible Solutions. But the stock apears to be less risky and, when comparing its historical volatility, Timken Company is 1.08 times less risky than Flexible Solutions. The stock trades about -0.19 of its potential returns per unit of risk. The Flexible Solutions International is currently generating about -0.15 of returns per unit of risk over similar time horizon. If you would invest  378.00  in Flexible Solutions International on October 10, 2024 and sell it today you would lose (18.00) from holding Flexible Solutions International or give up 4.76% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.24%
Values	Daily Returns

Timken Company  vs.  Flexible Solutions Internation

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.

Flexible Solutions

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Flexible Solutions International are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong basic indicators, Flexible Solutions is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Timken and Flexible Solutions

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

The idea behind Timken Company and Flexible Solutions International 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 Transaction History module to view history of all your transactions and understand their impact on performance.