Correlation Between FLOWERS and Timken

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

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

Diversification Opportunities for FLOWERS and Timken

0.37

Correlation Coefficient

FLOWERS  Timken

Weak diversification

The 3 months correlation between FLOWERS and Timken is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding FLOWERS FOODS INC and Timken Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Timken Company and FLOWERS 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 FLOWERS FOODS INC are associated (or correlated) with Timken. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Timken Company has no effect on the direction of FLOWERS i.e., FLOWERS and Timken go up and down completely randomly.

Pair Corralation between FLOWERS and Timken

Assuming the 90 days trading horizon FLOWERS FOODS INC is expected to under-perform the Timken. But the bond apears to be less risky and, when comparing its historical volatility, FLOWERS FOODS INC is 3.18 times less risky than Timken. The bond trades about -0.15 of its potential returns per unit of risk. The Timken Company is currently generating about -0.04 of returns per unit of risk over similar time horizon. If you would invest  8,087  in Timken Company on September 18, 2024 and sell it today you would lose (601.00) from holding Timken Company or give up 7.43% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	63.49%
Values	Daily Returns

FLOWERS FOODS INC  vs.  Timken Company

FLOWERS FOODS INC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days FLOWERS FOODS INC has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Bond's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for FLOWERS FOODS INC investors.

Timken Company

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Timken Company has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable forward-looking signals, Timken is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with FLOWERS and Timken

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

The idea behind FLOWERS FOODS INC and Timken Company 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 Transaction History module to view history of all your transactions and understand their impact on performance.