Correlation Between Flex and Natural Alternatives

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

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

Diversification Opportunities for Flex and Natural Alternatives

-0.77

Correlation Coefficient

Flex  Natural Alternatives

Pay attention - limited upside

The 3 months correlation between Flex and Natural is -0.77. Overlapping area represents the amount of risk that can be diversified away by holding Flex and Natural Alternatives Internati in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Natural Alternatives and Flex 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 Flex are associated (or correlated) with Natural Alternatives. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Natural Alternatives has no effect on the direction of Flex i.e., Flex and Natural Alternatives go up and down completely randomly.

Pair Corralation between Flex and Natural Alternatives

Given the investment horizon of 90 days Flex is expected to generate 0.54 times more return on investment than Natural Alternatives. However, Flex is 1.86 times less risky than Natural Alternatives. It trades about 0.17 of its potential returns per unit of risk. Natural Alternatives International is currently generating about -0.06 per unit of risk. If you would invest  3,045  in Flex on September 3, 2024 and sell it today you would earn a total of  852.00  from holding Flex or generate 27.98% return on investment over 90 days.

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

Flex  vs.  Natural Alternatives Internati

Flex

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Flex are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating technical and fundamental indicators, Flex showed solid returns over the last few months and may actually be approaching a breakup point.

Natural Alternatives

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Natural Alternatives International has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's forward indicators remain fairly strong which may send shares a bit higher in January 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Pair Trading with Flex and Natural Alternatives

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

The idea behind Flex and Natural Alternatives International 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.