Correlation Between JE Cleantech and Flowserve

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

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

Diversification Opportunities for JE Cleantech and Flowserve

-0.05

Correlation Coefficient

JE Cleantech  Flowserve

Good diversification

The 3 months correlation between JCSE and Flowserve is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding JE Cleantech Holdings and Flowserve in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Flowserve and JE Cleantech 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 JE Cleantech Holdings 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 JE Cleantech i.e., JE Cleantech and Flowserve go up and down completely randomly.

Pair Corralation between JE Cleantech and Flowserve

Given the investment horizon of 90 days JE Cleantech Holdings is expected to generate 5.54 times more return on investment than Flowserve. However, JE Cleantech is 5.54 times more volatile than Flowserve. It trades about 0.05 of its potential returns per unit of risk. Flowserve is currently generating about 0.22 per unit of risk. If you would invest  114.00  in JE Cleantech Holdings on September 2, 2024 and sell it today you would earn a total of  5.00  from holding JE Cleantech Holdings or generate 4.39% return on investment over 90 days.

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

JE Cleantech Holdings  vs.  Flowserve

JE Cleantech Holdings

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in JE Cleantech Holdings are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak basic indicators, JE Cleantech exhibited 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 JE Cleantech and Flowserve

The main advantage of trading using opposite JE Cleantech and Flowserve positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if JE Cleantech 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 JE Cleantech Holdings 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .