Correlation Between Flexible Solutions and EDISON

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Can any of the company-specific risk be diversified away by investing in both Flexible Solutions and EDISON 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 EDISON 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 EDISON INTL 4125, you can compare the effects of market volatilities on Flexible Solutions and EDISON 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 EDISON. Check out your portfolio center. Please also check ongoing floating volatility patterns of Flexible Solutions and EDISON.

Diversification Opportunities for Flexible Solutions and EDISON

-0.32
  Correlation Coefficient

Very good diversification

The 3 months correlation between Flexible and EDISON is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding Flexible Solutions Internation and EDISON INTL 4125 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EDISON INTL 4125 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 EDISON. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EDISON INTL 4125 has no effect on the direction of Flexible Solutions i.e., Flexible Solutions and EDISON go up and down completely randomly.

Pair Corralation between Flexible Solutions and EDISON

Considering the 90-day investment horizon Flexible Solutions International is expected to generate 6.27 times more return on investment than EDISON. However, Flexible Solutions is 6.27 times more volatile than EDISON INTL 4125. It trades about 0.12 of its potential returns per unit of risk. EDISON INTL 4125 is currently generating about -0.01 per unit of risk. If you would invest  152.00  in Flexible Solutions International on September 14, 2024 and sell it today you would earn a total of  239.00  from holding Flexible Solutions International or generate 157.24% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy97.59%
ValuesDaily Returns

Flexible Solutions Internation  vs.  EDISON INTL 4125

 Performance 
       Timeline  
Flexible Solutions 

Risk-Adjusted Performance

6 of 100

 
Weak
 
Strong
Modest
Compared to the overall equity markets, risk-adjusted returns on investments in Flexible Solutions International are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak basic indicators, Flexible Solutions demonstrated solid returns over the last few months and may actually be approaching a breakup point.
EDISON INTL 4125 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days EDISON INTL 4125 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, EDISON is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Flexible Solutions and EDISON Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Flexible Solutions and EDISON

The main advantage of trading using opposite Flexible Solutions and EDISON positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Flexible Solutions position performs unexpectedly, EDISON 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 EDISON will offset losses from the drop in EDISON's long position.
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The idea behind Flexible Solutions International and EDISON INTL 4125 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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.

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