Correlation Between FLSmidth and Matas AS
Can any of the company-specific risk be diversified away by investing in both FLSmidth and Matas AS 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 Matas AS into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between FLSmidth Co and Matas AS, you can compare the effects of market volatilities on FLSmidth and Matas AS 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 Matas AS. Check out your portfolio center. Please also check ongoing floating volatility patterns of FLSmidth and Matas AS.
Diversification Opportunities for FLSmidth and Matas AS
Weak diversification
The 3 months correlation between FLSmidth and Matas is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding FLSmidth Co and Matas AS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Matas AS 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 Matas AS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Matas AS has no effect on the direction of FLSmidth i.e., FLSmidth and Matas AS go up and down completely randomly.
Pair Corralation between FLSmidth and Matas AS
Assuming the 90 days trading horizon FLSmidth Co is expected to generate 0.84 times more return on investment than Matas AS. However, FLSmidth Co is 1.19 times less risky than Matas AS. It trades about 0.14 of its potential returns per unit of risk. Matas AS is currently generating about -0.05 per unit of risk. If you would invest 35,480 in FLSmidth Co on August 25, 2024 and sell it today you would earn a total of 1,840 from holding FLSmidth Co or generate 5.19% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
FLSmidth Co vs. Matas AS
Performance |
| Timeline |
| FLSmidth |
| Matas AS |
FLSmidth and Matas AS Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with FLSmidth and Matas AS
The main advantage of trading using opposite FLSmidth and Matas AS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if FLSmidth position performs unexpectedly, Matas AS 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 Matas AS will offset losses from the drop in Matas AS's long position.The idea behind FLSmidth Co and Matas AS 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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