Correlation Between Flowtech Fluidpower and Aeorema Communications

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

By analyzing existing cross correlation between Flowtech Fluidpower plc and Aeorema Communications Plc, you can compare the effects of market volatilities on Flowtech Fluidpower and Aeorema Communications 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 Flowtech Fluidpower with a short position of Aeorema Communications. Check out your portfolio center. Please also check ongoing floating volatility patterns of Flowtech Fluidpower and Aeorema Communications.

Diversification Opportunities for Flowtech Fluidpower and Aeorema Communications

0.52

Correlation Coefficient

Flowtech Fluidpower  Aeorema Communications

Very weak diversification

The 3 months correlation between Flowtech and Aeorema is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Flowtech Fluidpower plc and Aeorema Communications Plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aeorema Communications and Flowtech Fluidpower 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 Flowtech Fluidpower plc are associated (or correlated) with Aeorema Communications. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aeorema Communications has no effect on the direction of Flowtech Fluidpower i.e., Flowtech Fluidpower and Aeorema Communications go up and down completely randomly.

Pair Corralation between Flowtech Fluidpower and Aeorema Communications

Assuming the 90 days trading horizon Flowtech Fluidpower is expected to generate 1.03 times less return on investment than Aeorema Communications. But when comparing it to its historical volatility, Flowtech Fluidpower plc is 1.04 times less risky than Aeorema Communications. It trades about 0.1 of its potential returns per unit of risk. Aeorema Communications Plc is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  4,300  in Aeorema Communications Plc on April 20, 2025 and sell it today you would earn a total of  450.00  from holding Aeorema Communications Plc or generate 10.47% return on investment over 90 days.

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

Flowtech Fluidpower plc  vs.  Aeorema Communications Plc

Flowtech Fluidpower plc

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Flowtech Fluidpower plc are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, Flowtech Fluidpower may actually be approaching a critical reversion point that can send shares even higher in August 2025.

Aeorema Communications

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Aeorema Communications Plc are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, Aeorema Communications may actually be approaching a critical reversion point that can send shares even higher in August 2025.

Pair Trading with Flowtech Fluidpower and Aeorema Communications

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

The idea behind Flowtech Fluidpower plc and Aeorema Communications Plc 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.