Correlation Between Flow Beverage and Canlan Ice

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

By analyzing existing cross correlation between Flow Beverage Corp and Canlan Ice Sports, you can compare the effects of market volatilities on Flow Beverage and Canlan Ice 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 Flow Beverage with a short position of Canlan Ice. Check out your portfolio center. Please also check ongoing floating volatility patterns of Flow Beverage and Canlan Ice.

Diversification Opportunities for Flow Beverage and Canlan Ice

0.67

Correlation Coefficient

Flow Beverage  Canlan Ice

Poor diversification

The 3 months correlation between Flow and Canlan is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Flow Beverage Corp and Canlan Ice Sports in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Canlan Ice Sports and Flow Beverage 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 Flow Beverage Corp are associated (or correlated) with Canlan Ice. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Canlan Ice Sports has no effect on the direction of Flow Beverage i.e., Flow Beverage and Canlan Ice go up and down completely randomly.

Pair Corralation between Flow Beverage and Canlan Ice

Assuming the 90 days trading horizon Flow Beverage Corp is expected to under-perform the Canlan Ice. In addition to that, Flow Beverage is 1.46 times more volatile than Canlan Ice Sports. It trades about -0.1 of its total potential returns per unit of risk. Canlan Ice Sports is currently generating about -0.06 per unit of volatility. If you would invest  388.00  in Canlan Ice Sports on February 4, 2024 and sell it today you would lose (16.00) from holding Canlan Ice Sports or give up 4.12% of portfolio value over 90 days.

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

Flow Beverage Corp  vs.  Canlan Ice Sports

Flow Beverage Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Flow Beverage Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in June 2024. The recent disarray may also be a sign of long period up-swing for the firm investors.

Canlan Ice Sports

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Canlan Ice Sports has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's technical and fundamental indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with Flow Beverage and Canlan Ice

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

The idea behind Flow Beverage Corp and Canlan Ice Sports 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 Stocks Directory module to find actively traded stocks across global markets.