Correlation Between Flowserve and Hillenbrand

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Can any of the company-specific risk be diversified away by investing in both Flowserve and Hillenbrand 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 Hillenbrand into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Flowserve and Hillenbrand, you can compare the effects of market volatilities on Flowserve and Hillenbrand 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 Hillenbrand. Check out your portfolio center. Please also check ongoing floating volatility patterns of Flowserve and Hillenbrand.

Diversification Opportunities for Flowserve and Hillenbrand

FlowserveHillenbrandDiversified AwayFlowserveHillenbrandDiversified Away100%
0.78
  Correlation Coefficient

Poor diversification

The 3 months correlation between Flowserve and Hillenbrand is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Flowserve and Hillenbrand in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hillenbrand 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 Hillenbrand. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hillenbrand has no effect on the direction of Flowserve i.e., Flowserve and Hillenbrand go up and down completely randomly.

Pair Corralation between Flowserve and Hillenbrand

Considering the 90-day investment horizon Flowserve is expected to under-perform the Hillenbrand. But the stock apears to be less risky and, when comparing its historical volatility, Flowserve is 1.28 times less risky than Hillenbrand. The stock trades about -0.27 of its potential returns per unit of risk. The Hillenbrand is currently generating about -0.18 of returns per unit of risk over similar time horizon. If you would invest  3,503  in Hillenbrand on November 25, 2024 and sell it today you would lose (414.00) from holding Hillenbrand or give up 11.82% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Flowserve  vs.  Hillenbrand

 Performance 
JavaScript chart by amCharts 3.21.15Dec2025Feb -10-50510
JavaScript chart by amCharts 3.21.15FLS HI
       Timeline  
Flowserve 

Risk-Adjusted Performance

Very Weak

 
Weak
 
Strong
Over the last 90 days Flowserve has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's essential indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.
JavaScript chart by amCharts 3.21.15DecJanFebJanFeb565860626466
Hillenbrand 

Risk-Adjusted Performance

Very Weak

 
Weak
 
Strong
Over the last 90 days Hillenbrand has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's forward indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the firm traders.
JavaScript chart by amCharts 3.21.15DecJanFebJanFeb29303132333435

Flowserve and Hillenbrand Volatility Contrast

   Predicted Return Density   
JavaScript chart by amCharts 3.21.15-2.86-2.14-1.42-0.71-0.0120.661.352.042.723.41 0.060.070.080.090.100.110.120.13
JavaScript chart by amCharts 3.21.15FLS HI
       Returns  

Pair Trading with Flowserve and Hillenbrand

The main advantage of trading using opposite Flowserve and Hillenbrand positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Flowserve position performs unexpectedly, Hillenbrand 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 Hillenbrand will offset losses from the drop in Hillenbrand's long position.
The idea behind Flowserve and Hillenbrand 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.
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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 Commodity Directory module to find actively traded commodities issued by global exchanges.

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