Correlation Between Flexsteel Industries and Holley

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

Diversification Opportunities for Flexsteel Industries and Holley

-0.54
  Correlation Coefficient

Excellent diversification

The 3 months correlation between Flexsteel and Holley is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding Flexsteel Industries and Holley Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Holley Inc and Flexsteel Industries 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 Flexsteel Industries are associated (or correlated) with Holley. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Holley Inc has no effect on the direction of Flexsteel Industries i.e., Flexsteel Industries and Holley go up and down completely randomly.

Pair Corralation between Flexsteel Industries and Holley

Given the investment horizon of 90 days Flexsteel Industries is expected to generate 0.89 times more return on investment than Holley. However, Flexsteel Industries is 1.12 times less risky than Holley. It trades about 0.07 of its potential returns per unit of risk. Holley Inc is currently generating about 0.03 per unit of risk. If you would invest  2,027  in Flexsteel Industries on November 19, 2024 and sell it today you would earn a total of  3,138  from holding Flexsteel Industries or generate 154.81% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

Flexsteel Industries  vs.  Holley Inc

 Performance 
       Timeline  
Flexsteel Industries 

Risk-Adjusted Performance

Very Weak

 
Weak
 
Strong
Over the last 90 days Flexsteel Industries has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Flexsteel Industries is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.
Holley Inc 

Risk-Adjusted Performance

Modest

 
Weak
 
Strong
Compared to the overall equity markets, risk-adjusted returns on investments in Holley Inc are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating essential indicators, Holley may actually be approaching a critical reversion point that can send shares even higher in March 2025.

Flexsteel Industries and Holley Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Flexsteel Industries and Holley

The main advantage of trading using opposite Flexsteel Industries and Holley positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Flexsteel Industries position performs unexpectedly, Holley 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 Holley will offset losses from the drop in Holley's long position.
The idea behind Flexsteel Industries and Holley Inc 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.

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