Correlation Between PARKEN Sport and FLSmidth
Can any of the company-specific risk be diversified away by investing in both PARKEN Sport and FLSmidth 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 PARKEN Sport and FLSmidth into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between PARKEN Sport Entertainment and FLSmidth Co, you can compare the effects of market volatilities on PARKEN Sport and FLSmidth 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 PARKEN Sport with a short position of FLSmidth. Check out your portfolio center. Please also check ongoing floating volatility patterns of PARKEN Sport and FLSmidth.
Diversification Opportunities for PARKEN Sport and FLSmidth
0.37 | Correlation Coefficient |
Weak diversification
The 3 months correlation between PARKEN and FLSmidth is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding PARKEN Sport Entertainment and FLSmidth Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FLSmidth and PARKEN Sport 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 PARKEN Sport Entertainment are associated (or correlated) with FLSmidth. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FLSmidth has no effect on the direction of PARKEN Sport i.e., PARKEN Sport and FLSmidth go up and down completely randomly.
Pair Corralation between PARKEN Sport and FLSmidth
Assuming the 90 days trading horizon PARKEN Sport is expected to generate 2.77 times less return on investment than FLSmidth. In addition to that, PARKEN Sport is 1.28 times more volatile than FLSmidth Co. It trades about 0.05 of its total potential returns per unit of risk. FLSmidth Co is currently generating about 0.16 per unit of volatility. If you would invest 36,520 in FLSmidth Co on September 12, 2024 and sell it today you would earn a total of 1,460 from holding FLSmidth Co or generate 4.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 95.65% |
| Values | Daily Returns |
PARKEN Sport Entertainment vs. FLSmidth Co
Performance |
| Timeline |
| PARKEN Sport Enterta |
| FLSmidth |
PARKEN Sport and FLSmidth Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with PARKEN Sport and FLSmidth
The main advantage of trading using opposite PARKEN Sport and FLSmidth positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PARKEN Sport position performs unexpectedly, FLSmidth 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 FLSmidth will offset losses from the drop in FLSmidth's long position.The idea behind PARKEN Sport Entertainment and FLSmidth Co 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.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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.
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