Correlation Between GATX and FlexShopper

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

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

Diversification Opportunities for GATX and FlexShopper

0.69

Correlation Coefficient

GATX  FlexShopper

Poor diversification

The 3 months correlation between GATX and FlexShopper is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding GATX Corp. and FlexShopper in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FlexShopper and GATX 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 GATX Corporation are associated (or correlated) with FlexShopper. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FlexShopper has no effect on the direction of GATX i.e., GATX and FlexShopper go up and down completely randomly.

Pair Corralation between GATX and FlexShopper

Given the investment horizon of 90 days GATX is expected to generate 3.22 times less return on investment than FlexShopper. But when comparing it to its historical volatility, GATX Corporation is 2.77 times less risky than FlexShopper. It trades about 0.19 of its potential returns per unit of risk. FlexShopper is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest  109.00  in FlexShopper on September 3, 2024 and sell it today you would earn a total of  89.00  from holding FlexShopper or generate 81.65% return on investment over 90 days.

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

GATX Corp.  vs.  FlexShopper

GATX

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in GATX Corporation are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain basic indicators, GATX showed solid returns over the last few months and may actually be approaching a breakup point.

FlexShopper

Risk-Adjusted Performance

17 of 100

Solid

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

Pair Trading with GATX and FlexShopper

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

The idea behind GATX Corporation and FlexShopper 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.