Correlation Between Story and Flow

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

Diversification Opportunities for Story and Flow

0.91
  Correlation Coefficient

Almost no diversification

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

Pair Corralation between Story and Flow

Assuming the 90 days horizon Story is expected to generate 1.76 times more return on investment than Flow. However, Story is 1.76 times more volatile than Flow. It trades about 0.08 of its potential returns per unit of risk. Flow is currently generating about 0.05 per unit of risk. If you would invest  402.00  in Story on April 24, 2025 and sell it today you would earn a total of  98.00  from holding Story or generate 24.38% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Strong
Accuracy100.0%
ValuesDaily Returns

Story  vs.  Flow

 Performance 
       Timeline  
Story 

Risk-Adjusted Performance

OK

 
Weak
 
Strong
Compared to the overall equity markets, risk-adjusted returns on investments in Story are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady fundamental indicators, Story exhibited solid returns over the last few months and may actually be approaching a breakup point.
Flow 

Risk-Adjusted Performance

Insignificant

 
Weak
 
Strong
Compared to the overall equity markets, risk-adjusted returns on investments in Flow are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady fundamental indicators, Flow may actually be approaching a critical reversion point that can send shares even higher in August 2025.

Story and Flow Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Story and Flow

The main advantage of trading using opposite Story and Flow positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Story position performs unexpectedly, Flow 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 Flow will offset losses from the drop in Flow's long position.
The idea behind Story and Flow 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.

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