Correlation Between FLSmidth and GN Store
Can any of the company-specific risk be diversified away by investing in both FLSmidth and GN Store 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 GN Store into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between FLSmidth Co and GN Store Nord, you can compare the effects of market volatilities on FLSmidth and GN Store 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 GN Store. Check out your portfolio center. Please also check ongoing floating volatility patterns of FLSmidth and GN Store.
Diversification Opportunities for FLSmidth and GN Store
Pay attention - limited upside
The 3 months correlation between FLSmidth and GN Store is -0.73. Overlapping area represents the amount of risk that can be diversified away by holding FLSmidth Co and GN Store Nord in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GN Store Nord 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 GN Store. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GN Store Nord has no effect on the direction of FLSmidth i.e., FLSmidth and GN Store go up and down completely randomly.
Pair Corralation between FLSmidth and GN Store
Assuming the 90 days trading horizon FLSmidth Co is expected to generate 0.63 times more return on investment than GN Store. However, FLSmidth Co is 1.58 times less risky than GN Store. It trades about 0.04 of its potential returns per unit of risk. GN Store Nord is currently generating about 0.01 per unit of risk. If you would invest 36,920 in FLSmidth Co on August 28, 2024 and sell it today you would earn a total of 360.00 from holding FLSmidth Co or generate 0.98% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
FLSmidth Co vs. GN Store Nord
Performance |
| Timeline |
| FLSmidth |
| GN Store Nord |
FLSmidth and GN Store Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with FLSmidth and GN Store
The main advantage of trading using opposite FLSmidth and GN Store positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if FLSmidth position performs unexpectedly, GN Store 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 GN Store will offset losses from the drop in GN Store's long position.The idea behind FLSmidth Co and GN Store Nord 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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