Correlation Between Velan and Flowserve
Can any of the company-specific risk be diversified away by investing in both Velan 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 Velan and Flowserve into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Velan Inc and Flowserve, you can compare the effects of market volatilities on Velan 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 Velan with a short position of Flowserve. Check out your portfolio center. Please also check ongoing floating volatility patterns of Velan and Flowserve.
Diversification Opportunities for Velan and Flowserve
Modest diversification
The 3 months correlation between Velan and Flowserve is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Velan Inc and Flowserve in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Flowserve and Velan 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 Velan Inc 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 Velan i.e., Velan and Flowserve go up and down completely randomly.
Pair Corralation between Velan and Flowserve
Assuming the 90 days horizon Velan Inc is expected to generate 2.59 times more return on investment than Flowserve. However, Velan is 2.59 times more volatile than Flowserve. It trades about 0.16 of its potential returns per unit of risk. Flowserve is currently generating about 0.07 per unit of risk. If you would invest 453.00 in Velan Inc on December 4, 2024 and sell it today you would earn a total of 600.00 from holding Velan Inc or generate 132.45% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 96.83% |
| Values | Daily Returns |
Velan Inc vs. Flowserve
Performance |
| Timeline |
| Velan Inc |
| Flowserve |
Velan and Flowserve Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Velan and Flowserve
The main advantage of trading using opposite Velan and Flowserve positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Velan 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.The idea behind Velan Inc and Flowserve 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.| 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.
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