Correlation Between FSN and Flow

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

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

Diversification Opportunities for FSN and Flow

0.02

Correlation Coefficient

FSN  Flow

Significant diversification

The 3 months correlation between FSN and Flow is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding FSN and Flow in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Flow and FSN 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 FSN are associated (or correlated) with Flow. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Flow has no effect on the direction of FSN i.e., FSN and Flow go up and down completely randomly.

Pair Corralation between FSN and Flow

Assuming the 90 days trading horizon FSN is expected to generate 1.85 times less return on investment than Flow. In addition to that, FSN is 1.69 times more volatile than Flow. It trades about 0.07 of its total potential returns per unit of risk. Flow is currently generating about 0.23 per unit of volatility. If you would invest  55.00  in Flow on September 2, 2024 and sell it today you would earn a total of  44.00  from holding Flow or generate 80.0% return on investment over 90 days.

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

FSN  vs.  Flow

FSN

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in FSN are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, FSN exhibited solid returns over the last few months and may actually be approaching a breakup point.

Flow

Risk-Adjusted Performance

17 of 100

Solid

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

Pair Trading with FSN and Flow

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

The idea behind FSN and Flow 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.