Correlation Between ForFarmers and Flow Traders
Can any of the company-specific risk be diversified away by investing in both ForFarmers and Flow Traders 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 ForFarmers and Flow Traders into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ForFarmers NV and Flow Traders BV, you can compare the effects of market volatilities on ForFarmers and Flow Traders 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 ForFarmers with a short position of Flow Traders. Check out your portfolio center. Please also check ongoing floating volatility patterns of ForFarmers and Flow Traders.
Diversification Opportunities for ForFarmers and Flow Traders
0.75 | Correlation Coefficient |
Poor diversification
The 3 months correlation between ForFarmers and Flow is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding ForFarmers NV and Flow Traders BV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Flow Traders BV and ForFarmers 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 ForFarmers NV are associated (or correlated) with Flow Traders. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Flow Traders BV has no effect on the direction of ForFarmers i.e., ForFarmers and Flow Traders go up and down completely randomly.
Pair Corralation between ForFarmers and Flow Traders
Assuming the 90 days trading horizon ForFarmers NV is expected to under-perform the Flow Traders. But the stock apears to be less risky and, when comparing its historical volatility, ForFarmers NV is 1.09 times less risky than Flow Traders. The stock trades about -0.1 of its potential returns per unit of risk. The Flow Traders BV is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 2,076 in Flow Traders BV on August 31, 2024 and sell it today you would earn a total of 46.00 from holding Flow Traders BV or generate 2.22% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
ForFarmers NV vs. Flow Traders BV
Performance |
| Timeline |
| ForFarmers NV |
| Flow Traders BV |
ForFarmers and Flow Traders Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ForFarmers and Flow Traders
The main advantage of trading using opposite ForFarmers and Flow Traders positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ForFarmers position performs unexpectedly, Flow Traders 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 Flow Traders will offset losses from the drop in Flow Traders' long position.| ForFarmers vs. Koninklijke Heijmans NV | ForFarmers vs. Amsterdam Commodities NV | ForFarmers vs. Flow Traders BV | ForFarmers vs. Koninklijke BAM Groep |
| Flow Traders vs. Aegon NV | Flow Traders vs. ABN Amro Group | Flow Traders vs. Koninklijke Philips NV | Flow Traders vs. Unilever PLC |
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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.
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