Correlation Between Flow Traders and Edita Food

Can any of the company-specific risk be diversified away by investing in both Flow Traders and Edita Food 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 Flow Traders and Edita Food into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Flow Traders NV and Edita Food Industries, you can compare the effects of market volatilities on Flow Traders and Edita Food 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 Flow Traders with a short position of Edita Food. Check out your portfolio center. Please also check ongoing floating volatility patterns of Flow Traders and Edita Food.

Diversification Opportunities for Flow Traders and Edita Food

-0.3

Correlation Coefficient

Flow Traders  Edita Food

Very good diversification

The 3 months correlation between Flow and Edita is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding Flow Traders NV and Edita Food Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Edita Food Industries and Flow Traders 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 Flow Traders NV are associated (or correlated) with Edita Food. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Edita Food Industries has no effect on the direction of Flow Traders i.e., Flow Traders and Edita Food go up and down completely randomly.

Pair Corralation between Flow Traders and Edita Food

Assuming the 90 days trading horizon Flow Traders NV is expected to generate 0.43 times more return on investment than Edita Food. However, Flow Traders NV is 2.34 times less risky than Edita Food. It trades about 0.23 of its potential returns per unit of risk. Edita Food Industries is currently generating about -0.07 per unit of risk. If you would invest  1,827  in Flow Traders NV on September 19, 2024 and sell it today you would earn a total of  421.00  from holding Flow Traders NV or generate 23.04% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Flow Traders NV  vs.  Edita Food Industries

Flow Traders NV

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Flow Traders NV are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Flow Traders unveiled solid returns over the last few months and may actually be approaching a breakup point.

Edita Food Industries

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Edita Food Industries has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Flow Traders and Edita Food

The main advantage of trading using opposite Flow Traders and Edita Food positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Flow Traders position performs unexpectedly, Edita Food 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 Edita Food will offset losses from the drop in Edita Food's long position.

The idea behind Flow Traders NV and Edita Food Industries 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.