Correlation Between Flexpoint Sensor and Federal Signal

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Can any of the company-specific risk be diversified away by investing in both Flexpoint Sensor and Federal Signal 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 Flexpoint Sensor and Federal Signal into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Flexpoint Sensor Systems and Federal Signal, you can compare the effects of market volatilities on Flexpoint Sensor and Federal Signal 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 Flexpoint Sensor with a short position of Federal Signal. Check out your portfolio center. Please also check ongoing floating volatility patterns of Flexpoint Sensor and Federal Signal.

Diversification Opportunities for Flexpoint Sensor and Federal Signal

0.28
  Correlation Coefficient

Modest diversification

The 3 months correlation between Flexpoint and Federal is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Flexpoint Sensor Systems and Federal Signal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Federal Signal and Flexpoint Sensor 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 Flexpoint Sensor Systems are associated (or correlated) with Federal Signal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Federal Signal has no effect on the direction of Flexpoint Sensor i.e., Flexpoint Sensor and Federal Signal go up and down completely randomly.

Pair Corralation between Flexpoint Sensor and Federal Signal

Given the investment horizon of 90 days Flexpoint Sensor Systems is expected to generate 8.84 times more return on investment than Federal Signal. However, Flexpoint Sensor is 8.84 times more volatile than Federal Signal. It trades about 0.13 of its potential returns per unit of risk. Federal Signal is currently generating about 0.02 per unit of risk. If you would invest  0.50  in Flexpoint Sensor Systems on December 29, 2023 and sell it today you would earn a total of  0.12  from holding Flexpoint Sensor Systems or generate 24.0% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

Flexpoint Sensor Systems  vs.  Federal Signal

 Performance 
       Timeline  
Flexpoint Sensor Systems 

Risk-Adjusted Performance

8 of 100

 
Low
 
High
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Flexpoint Sensor Systems are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, Flexpoint Sensor unveiled solid returns over the last few months and may actually be approaching a breakup point.
Federal Signal 

Risk-Adjusted Performance

9 of 100

 
Low
 
High
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Federal Signal are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively inconsistent basic indicators, Federal Signal may actually be approaching a critical reversion point that can send shares even higher in April 2024.

Flexpoint Sensor and Federal Signal Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Flexpoint Sensor and Federal Signal

The main advantage of trading using opposite Flexpoint Sensor and Federal Signal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Flexpoint Sensor position performs unexpectedly, Federal Signal 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 Federal Signal will offset losses from the drop in Federal Signal's long position.
The idea behind Flexpoint Sensor Systems and Federal Signal 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.
Check out your portfolio center.
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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.

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