Correlation Between FLSmidth and PARKEN Sport
Can any of the company-specific risk be diversified away by investing in both FLSmidth and PARKEN Sport 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 PARKEN Sport into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between FLSmidth Co and PARKEN Sport Entertainment, you can compare the effects of market volatilities on FLSmidth and PARKEN Sport 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 PARKEN Sport. Check out your portfolio center. Please also check ongoing floating volatility patterns of FLSmidth and PARKEN Sport.
Diversification Opportunities for FLSmidth and PARKEN Sport
0.37 | Correlation Coefficient |
Weak diversification
The 3 months correlation between FLSmidth and PARKEN is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding FLSmidth Co and PARKEN Sport Entertainment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PARKEN Sport Enterta 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 PARKEN Sport. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PARKEN Sport Enterta has no effect on the direction of FLSmidth i.e., FLSmidth and PARKEN Sport go up and down completely randomly.
Pair Corralation between FLSmidth and PARKEN Sport
Assuming the 90 days trading horizon FLSmidth is expected to generate 1.32 times less return on investment than PARKEN Sport. In addition to that, FLSmidth is 1.04 times more volatile than PARKEN Sport Entertainment. It trades about 0.06 of its total potential returns per unit of risk. PARKEN Sport Entertainment is currently generating about 0.08 per unit of volatility. If you would invest 6,618 in PARKEN Sport Entertainment on September 12, 2024 and sell it today you would earn a total of 5,982 from holding PARKEN Sport Entertainment or generate 90.39% 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. PARKEN Sport Entertainment
Performance |
| Timeline |
| FLSmidth |
| PARKEN Sport Enterta |
FLSmidth and PARKEN Sport Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with FLSmidth and PARKEN Sport
The main advantage of trading using opposite FLSmidth and PARKEN Sport positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if FLSmidth position performs unexpectedly, PARKEN Sport 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 PARKEN Sport will offset losses from the drop in PARKEN Sport's long position.The idea behind FLSmidth Co and PARKEN Sport Entertainment 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.
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