Correlation Between Applied UV and Flexsteel Industries

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

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

Diversification Opportunities for Applied UV and Flexsteel Industries

-0.91

Correlation Coefficient

Applied UV  Flexsteel Industries

Pay attention - limited upside

The 3 months correlation between Applied and Flexsteel is -0.91. Overlapping area represents the amount of risk that can be diversified away by holding Applied UV and Flexsteel Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Flexsteel Industries and Applied UV 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 Applied UV are associated (or correlated) with Flexsteel Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Flexsteel Industries has no effect on the direction of Applied UV i.e., Applied UV and Flexsteel Industries go up and down completely randomly.

Pair Corralation between Applied UV and Flexsteel Industries

Given the investment horizon of 90 days Applied UV is expected to under-perform the Flexsteel Industries. In addition to that, Applied UV is 2.57 times more volatile than Flexsteel Industries. It trades about -0.79 of its total potential returns per unit of risk. Flexsteel Industries is currently generating about 0.13 per unit of volatility. If you would invest  3,662  in Flexsteel Industries on January 26, 2024 and sell it today you would earn a total of  225.00  from holding Flexsteel Industries or generate 6.14% return on investment over 90 days.

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

Applied UV  vs.  Flexsteel Industries

Applied UV

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Applied UV has generated negative risk-adjusted returns adding no value to investors with long positions. Despite inconsistent performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in May 2024. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Flexsteel Industries

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Flexsteel Industries are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Flexsteel Industries unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Applied UV and Flexsteel Industries

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

The idea behind Applied UV and Flexsteel Industries 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.