Correlation Between FLSmidth and Fingerprint Cards
Can any of the company-specific risk be diversified away by investing in both FLSmidth and Fingerprint Cards 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 FLSmidth and Fingerprint Cards into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between FLSmidth Co and Fingerprint Cards AB, you can compare the effects of market volatilities on FLSmidth and Fingerprint Cards 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 FLSmidth with a short position of Fingerprint Cards. Check out your portfolio center. Please also check ongoing floating volatility patterns of FLSmidth and Fingerprint Cards.
Diversification Opportunities for FLSmidth and Fingerprint Cards
0.18 | Correlation Coefficient |
Average diversification
The 3 months correlation between FLSmidth and Fingerprint is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding FLSmidth Co and Fingerprint Cards AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fingerprint Cards and FLSmidth 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 FLSmidth Co are associated (or correlated) with Fingerprint Cards. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fingerprint Cards has no effect on the direction of FLSmidth i.e., FLSmidth and Fingerprint Cards go up and down completely randomly.
Pair Corralation between FLSmidth and Fingerprint Cards
Assuming the 90 days trading horizon FLSmidth is expected to generate 8.64 times less return on investment than Fingerprint Cards. But when comparing it to its historical volatility, FLSmidth Co is 24.59 times less risky than Fingerprint Cards. It trades about 0.21 of its potential returns per unit of risk. Fingerprint Cards AB is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 3.58 in Fingerprint Cards AB on October 26, 2024 and sell it today you would lose (1.02) from holding Fingerprint Cards AB or give up 28.49% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 94.44% |
| Values | Daily Returns |
FLSmidth Co vs. Fingerprint Cards AB
Performance |
| Timeline |
| FLSmidth |
| Fingerprint Cards |
FLSmidth and Fingerprint Cards Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with FLSmidth and Fingerprint Cards
The main advantage of trading using opposite FLSmidth and Fingerprint Cards positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if FLSmidth position performs unexpectedly, Fingerprint Cards 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 Fingerprint Cards will offset losses from the drop in Fingerprint Cards' long position.The idea behind FLSmidth Co and Fingerprint Cards AB 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.| Fingerprint Cards vs. GomSpace Group AB | Fingerprint Cards vs. Precise Biometrics AB | Fingerprint Cards vs. Pandora AS | Fingerprint Cards vs. Bavarian Nordic |
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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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