Correlation Between Flowserve and Smith AO
Can any of the company-specific risk be diversified away by investing in both Flowserve and Smith AO 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 Flowserve and Smith AO into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Flowserve and Smith AO, you can compare the effects of market volatilities on Flowserve and Smith AO 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 Flowserve with a short position of Smith AO. Check out your portfolio center. Please also check ongoing floating volatility patterns of Flowserve and Smith AO.
Diversification Opportunities for Flowserve and Smith AO
Very good diversification
The 3 months correlation between Flowserve and Smith is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding Flowserve and Smith AO in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Smith AO and Flowserve 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 Flowserve are associated (or correlated) with Smith AO. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Smith AO has no effect on the direction of Flowserve i.e., Flowserve and Smith AO go up and down completely randomly.
Pair Corralation between Flowserve and Smith AO
Considering the 90-day investment horizon Flowserve is expected to generate 2.32 times more return on investment than Smith AO. However, Flowserve is 2.32 times more volatile than Smith AO. It trades about 0.28 of its potential returns per unit of risk. Smith AO is currently generating about -0.27 per unit of risk. If you would invest 5,300 in Flowserve on August 24, 2024 and sell it today you would earn a total of 705.00 from holding Flowserve or generate 13.3% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Flowserve vs. Smith AO
Performance |
| Timeline |
| Flowserve |
| Smith AO |
Flowserve and Smith AO Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Flowserve and Smith AO
The main advantage of trading using opposite Flowserve and Smith AO positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Flowserve position performs unexpectedly, Smith AO 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 Smith AO will offset losses from the drop in Smith AO's long position.| Flowserve vs. IDEX Corporation | Flowserve vs. Donaldson | Flowserve vs. Ingersoll Rand | Flowserve vs. Franklin Electric Co |
| Smith AO vs. Dover | Smith AO vs. Illinois Tool Works | Smith AO vs. Xylem Inc | Smith AO vs. Franklin Electric Co |
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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
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