Correlation Between Middleby Corp and Flowserve
Can any of the company-specific risk be diversified away by investing in both Middleby Corp 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 Middleby Corp and Flowserve into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Middleby Corp and Flowserve, you can compare the effects of market volatilities on Middleby Corp 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 Middleby Corp with a short position of Flowserve. Check out your portfolio center. Please also check ongoing floating volatility patterns of Middleby Corp and Flowserve.
Diversification Opportunities for Middleby Corp and Flowserve
0.59 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Middleby and Flowserve is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Middleby Corp and Flowserve in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Flowserve and Middleby Corp 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 Middleby Corp 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 Middleby Corp i.e., Middleby Corp and Flowserve go up and down completely randomly.
Pair Corralation between Middleby Corp and Flowserve
Given the investment horizon of 90 days Middleby Corp is expected to generate 1.82 times more return on investment than Flowserve. However, Middleby Corp is 1.82 times more volatile than Flowserve. It trades about 0.31 of its potential returns per unit of risk. Flowserve is currently generating about 0.18 per unit of risk. If you would invest 13,456 in Middleby Corp on November 9, 2024 and sell it today you would earn a total of 3,255 from holding Middleby Corp or generate 24.19% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Middleby Corp vs. Flowserve
Performance |
| Timeline |
| Middleby Corp |
| Flowserve |
Middleby Corp and Flowserve Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Middleby Corp and Flowserve
The main advantage of trading using opposite Middleby Corp and Flowserve positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Middleby Corp 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.| Middleby Corp vs. Enpro Industries | Middleby Corp vs. Kadant Inc | Middleby Corp vs. ITT Inc | Middleby Corp vs. Franklin Electric Co |
| Flowserve vs. IDEX Corporation | Flowserve vs. Donaldson | Flowserve vs. Ingersoll Rand | Flowserve vs. Franklin Electric Co |
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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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