Correlation Between Flowserve and ITT
Can any of the company-specific risk be diversified away by investing in both Flowserve and ITT 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 ITT into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Flowserve and ITT Inc, you can compare the effects of market volatilities on Flowserve and ITT 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 ITT. Check out your portfolio center. Please also check ongoing floating volatility patterns of Flowserve and ITT.
Diversification Opportunities for Flowserve and ITT
Very weak diversification
The 3 months correlation between Flowserve and ITT is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Flowserve and ITT Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ITT Inc 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 ITT. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ITT Inc has no effect on the direction of Flowserve i.e., Flowserve and ITT go up and down completely randomly.
Pair Corralation between Flowserve and ITT
Considering the 90-day investment horizon Flowserve is expected to generate 1.31 times more return on investment than ITT. However, Flowserve is 1.31 times more volatile than ITT Inc. It trades about -0.04 of its potential returns per unit of risk. ITT Inc is currently generating about -0.07 per unit of risk. If you would invest 6,350 in Flowserve on November 18, 2024 and sell it today you would lose (121.00) from holding Flowserve or give up 1.91% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Flowserve vs. ITT Inc
Performance |
| Timeline |
| Flowserve |
| ITT Inc |
Flowserve and ITT Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Flowserve and ITT
The main advantage of trading using opposite Flowserve and ITT positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Flowserve position performs unexpectedly, ITT 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 ITT will offset losses from the drop in ITT's long position.| Flowserve vs. IDEX Corporation | Flowserve vs. Donaldson | Flowserve vs. Ingersoll Rand | Flowserve 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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