Correlation Between First Business and Flexsteel Industries
Can any of the company-specific risk be diversified away by investing in both First Business and Flexsteel Industries 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 First Business and Flexsteel Industries into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between First Business Financial and Flexsteel Industries, you can compare the effects of market volatilities on First Business and Flexsteel Industries 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 First Business with a short position of Flexsteel Industries. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Business and Flexsteel Industries.
Diversification Opportunities for First Business and Flexsteel Industries
0.66 | Correlation Coefficient |
Poor diversification
The 3 months correlation between First and Flexsteel is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding First Business Financial and Flexsteel Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Flexsteel Industries and First Business 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 First Business Financial are associated (or correlated) with Flexsteel Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Flexsteel Industries has no effect on the direction of First Business i.e., First Business and Flexsteel Industries go up and down completely randomly.
Pair Corralation between First Business and Flexsteel Industries
Given the investment horizon of 90 days First Business is expected to generate 3.66 times less return on investment than Flexsteel Industries. But when comparing it to its historical volatility, First Business Financial is 1.6 times less risky than Flexsteel Industries. It trades about 0.04 of its potential returns per unit of risk. Flexsteel Industries is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 1,399 in Flexsteel Industries on August 30, 2024 and sell it today you would earn a total of 4,518 from holding Flexsteel Industries or generate 322.94% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
First Business Financial vs. Flexsteel Industries
Performance |
| Timeline |
| First Business Financial |
| Flexsteel Industries |
First Business and Flexsteel Industries Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Business and Flexsteel Industries
The main advantage of trading using opposite First Business and Flexsteel Industries positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Business position performs unexpectedly, Flexsteel Industries 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 Flexsteel Industries will offset losses from the drop in Flexsteel Industries' long position.| First Business vs. Home Federal Bancorp | First Business vs. Lake Shore Bancorp | First Business vs. Old Point Financial | First Business vs. Parke Bancorp |
| Flexsteel Industries vs. Hooker Furniture | Flexsteel Industries vs. Bassett Furniture Industries | Flexsteel Industries vs. Willis Lease Finance | Flexsteel Industries vs. Rocky Brands |
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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.
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