Correlation Between Inspired Plc and Flowtech Fluidpower

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

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

Diversification Opportunities for Inspired Plc and Flowtech Fluidpower

0.83

Correlation Coefficient

Inspired Plc  Flowtech Fluidpower

Very poor diversification

The 3 months correlation between Inspired and Flowtech is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Inspired Plc and Flowtech Fluidpower plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Flowtech Fluidpower plc and Inspired Plc 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 Inspired Plc are associated (or correlated) with Flowtech Fluidpower. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Flowtech Fluidpower plc has no effect on the direction of Inspired Plc i.e., Inspired Plc and Flowtech Fluidpower go up and down completely randomly.

Pair Corralation between Inspired Plc and Flowtech Fluidpower

Assuming the 90 days trading horizon Inspired Plc is expected to generate 1.18 times more return on investment than Flowtech Fluidpower. However, Inspired Plc is 1.18 times more volatile than Flowtech Fluidpower plc. It trades about 0.17 of its potential returns per unit of risk. Flowtech Fluidpower plc is currently generating about -0.04 per unit of risk. If you would invest  4,754  in Inspired Plc on April 13, 2025 and sell it today you would earn a total of  3,296  from holding Inspired Plc or generate 69.33% return on investment over 90 days.

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

Inspired Plc  vs.  Flowtech Fluidpower plc

Inspired Plc

Risk-Adjusted Performance

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Inspired Plc are ranked lower than 26 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Inspired Plc unveiled solid returns over the last few months and may actually be approaching a breakup point.

Flowtech Fluidpower plc

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Flowtech Fluidpower plc are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, Flowtech Fluidpower exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Inspired Plc and Flowtech Fluidpower

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

The idea behind Inspired Plc and Flowtech Fluidpower 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.