Correlation Between SP Global and FLOW TRADERS
Can any of the company-specific risk be diversified away by investing in both SP Global and FLOW TRADERS 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 SP Global and FLOW TRADERS into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between SP Global and FLOW TRADERS LTD, you can compare the effects of market volatilities on SP Global and FLOW TRADERS 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 SP Global with a short position of FLOW TRADERS. Check out your portfolio center. Please also check ongoing floating volatility patterns of SP Global and FLOW TRADERS.
Diversification Opportunities for SP Global and FLOW TRADERS
0.3 | Correlation Coefficient |
Weak diversification
The 3 months correlation between MHL and FLOW is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding SP Global and FLOW TRADERS LTD in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FLOW TRADERS LTD and SP Global 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 SP Global are associated (or correlated) with FLOW TRADERS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FLOW TRADERS LTD has no effect on the direction of SP Global i.e., SP Global and FLOW TRADERS go up and down completely randomly.
Pair Corralation between SP Global and FLOW TRADERS
Assuming the 90 days horizon SP Global is expected to generate 1.1 times less return on investment than FLOW TRADERS. But when comparing it to its historical volatility, SP Global is 1.73 times less risky than FLOW TRADERS. It trades about 0.1 of its potential returns per unit of risk. FLOW TRADERS LTD is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 1,876 in FLOW TRADERS LTD on September 29, 2024 and sell it today you would earn a total of 288.00 from holding FLOW TRADERS LTD or generate 15.35% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
SP Global vs. FLOW TRADERS LTD
Performance |
| Timeline |
| SP Global |
| FLOW TRADERS LTD |
SP Global and FLOW TRADERS Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SP Global and FLOW TRADERS
The main advantage of trading using opposite SP Global and FLOW TRADERS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SP Global position performs unexpectedly, FLOW TRADERS 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 FLOW TRADERS will offset losses from the drop in FLOW TRADERS's long position.The idea behind SP Global and FLOW TRADERS LTD 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.| FLOW TRADERS vs. Morgan Stanley | FLOW TRADERS vs. Morgan Stanley | FLOW TRADERS vs. SP Global | FLOW TRADERS vs. Moodys |
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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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