Correlation Between Graham and Flowserve
Can any of the company-specific risk be diversified away by investing in both Graham and Flowserve 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 Graham and Flowserve into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Graham and Flowserve, you can compare the effects of market volatilities on Graham and Flowserve 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 Graham with a short position of Flowserve. Check out your portfolio center. Please also check ongoing floating volatility patterns of Graham and Flowserve.
Diversification Opportunities for Graham and Flowserve
Poor diversification
The 3 months correlation between Graham and Flowserve is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Graham and Flowserve in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Flowserve and Graham 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 Graham are associated (or correlated) with Flowserve. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Flowserve has no effect on the direction of Graham i.e., Graham and Flowserve go up and down completely randomly.
Pair Corralation between Graham and Flowserve
Considering the 90-day investment horizon Graham is expected to generate 2.28 times more return on investment than Flowserve. However, Graham is 2.28 times more volatile than Flowserve. It trades about 0.44 of its potential returns per unit of risk. Flowserve is currently generating about 0.28 per unit of risk. If you would invest 2,878 in Graham on August 30, 2024 and sell it today you would earn a total of 1,523 from holding Graham or generate 52.92% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.65% |
| Values | Daily Returns |
Graham vs. Flowserve
Performance |
| Timeline |
| Graham |
| Flowserve |
Graham and Flowserve Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Graham and Flowserve
The main advantage of trading using opposite Graham and Flowserve positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Graham position performs unexpectedly, Flowserve 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 Flowserve will offset losses from the drop in Flowserve's long position.| Graham vs. Luxfer Holdings PLC | Graham vs. Enerpac Tool Group | Graham vs. Kadant Inc | Graham vs. Omega Flex |
| Flowserve vs. Illinois Tool Works | Flowserve vs. Pentair PLC | Flowserve vs. Emerson Electric | Flowserve vs. Smith AO |
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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