Correlation Between Flexible Solutions and Oil Dri

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

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

Diversification Opportunities for Flexible Solutions and Oil Dri

-0.15

Correlation Coefficient

Flexible Solutions  Oil Dri

Good diversification

The 3 months correlation between Flexible and Oil is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding Flexible Solutions Internation and Oil Dri in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Oil Dri and Flexible Solutions 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 Flexible Solutions International are associated (or correlated) with Oil Dri. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Oil Dri has no effect on the direction of Flexible Solutions i.e., Flexible Solutions and Oil Dri go up and down completely randomly.

Pair Corralation between Flexible Solutions and Oil Dri

Considering the 90-day investment horizon Flexible Solutions is expected to generate 3.49 times less return on investment than Oil Dri. In addition to that, Flexible Solutions is 1.17 times more volatile than Oil Dri. It trades about 0.04 of its total potential returns per unit of risk. Oil Dri is currently generating about 0.14 per unit of volatility. If you would invest  6,911  in Oil Dri on October 1, 2024 and sell it today you would earn a total of  1,862  from holding Oil Dri or generate 26.94% return on investment over 90 days.

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

Flexible Solutions Internation  vs.  Oil Dri

Flexible Solutions

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Flexible Solutions International are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak basic indicators, Flexible Solutions may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Oil Dri

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Oil Dri are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of rather conflicting fundamental indicators, Oil Dri exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Flexible Solutions and Oil Dri

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

The idea behind Flexible Solutions International and Oil Dri 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.