Correlation Between ATS and Flowserve

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

By analyzing existing cross correlation between ATS Corporation and Flowserve, you can compare the effects of market volatilities on ATS 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 ATS with a short position of Flowserve. Check out your portfolio center. Please also check ongoing floating volatility patterns of ATS and Flowserve.

Diversification Opportunities for ATS and Flowserve

0.65

Correlation Coefficient

ATS  Flowserve

Poor diversification

The 3 months correlation between ATS and Flowserve is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding ATS Corp. and Flowserve in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Flowserve and ATS 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 ATS Corporation 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 ATS i.e., ATS and Flowserve go up and down completely randomly.

Pair Corralation between ATS and Flowserve

Considering the 90-day investment horizon ATS is expected to generate 1.29 times less return on investment than Flowserve. In addition to that, ATS is 1.32 times more volatile than Flowserve. It trades about 0.13 of its total potential returns per unit of risk. Flowserve is currently generating about 0.22 per unit of volatility. If you would invest  4,745  in Flowserve on August 31, 2024 and sell it today you would earn a total of  1,357  from holding Flowserve or generate 28.6% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.44%
Values	Daily Returns

ATS Corp.  vs.  Flowserve

ATS Corporation

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in ATS Corporation are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, ATS unveiled solid returns over the last few months and may actually be approaching a breakup point.

Flowserve

Risk-Adjusted Performance

17 of 100

Solid

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

Pair Trading with ATS and Flowserve

The main advantage of trading using opposite ATS and Flowserve positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ATS 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 ATS Corporation 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.

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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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.