Correlation Between Flexible Solutions and SM Investments

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

Diversification Opportunities for Flexible Solutions and SM Investments

0.79
  Correlation Coefficient

Poor diversification

The 3 months correlation between Flexible and SVTMF is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Flexible Solutions Internation and SM Investments in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SM Investments and Flexible Solutions 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 Flexible Solutions International are associated (or correlated) with SM Investments. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SM Investments has no effect on the direction of Flexible Solutions i.e., Flexible Solutions and SM Investments go up and down completely randomly.

Pair Corralation between Flexible Solutions and SM Investments

Considering the 90-day investment horizon Flexible Solutions International is expected to generate 2.56 times more return on investment than SM Investments. However, Flexible Solutions is 2.56 times more volatile than SM Investments. It trades about 0.14 of its potential returns per unit of risk. SM Investments is currently generating about 0.02 per unit of risk. If you would invest  208.00  in Flexible Solutions International on September 7, 2024 and sell it today you would earn a total of  174.00  from holding Flexible Solutions International or generate 83.65% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Flexible Solutions Internation  vs.  SM Investments

 Performance 
       Timeline  
Flexible Solutions 

Risk-Adjusted Performance

7 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Flexible Solutions International are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite fairly unsteady basic indicators, Flexible Solutions demonstrated solid returns over the last few months and may actually be approaching a breakup point.
SM Investments 

Risk-Adjusted Performance

8 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in SM Investments are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain primary indicators, SM Investments reported solid returns over the last few months and may actually be approaching a breakup point.

Flexible Solutions and SM Investments Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Flexible Solutions and SM Investments

The main advantage of trading using opposite Flexible Solutions and SM Investments positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Flexible Solutions position performs unexpectedly, SM Investments 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 SM Investments will offset losses from the drop in SM Investments' long position.
The idea behind Flexible Solutions International and SM Investments 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.

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