Correlation Between Telecom Plus and Flow Traders

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

By analyzing existing cross correlation between Telecom Plus PLC and Flow Traders NV, you can compare the effects of market volatilities on Telecom Plus and Flow Traders 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 Telecom Plus with a short position of Flow Traders. Check out your portfolio center. Please also check ongoing floating volatility patterns of Telecom Plus and Flow Traders.

Diversification Opportunities for Telecom Plus and Flow Traders

0.7

Correlation Coefficient

Telecom Plus  Flow Traders

Poor diversification

The 3 months correlation between Telecom and Flow is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Telecom Plus PLC and Flow Traders NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Flow Traders NV and Telecom Plus 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 Telecom Plus PLC are associated (or correlated) with Flow Traders. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Flow Traders NV has no effect on the direction of Telecom Plus i.e., Telecom Plus and Flow Traders go up and down completely randomly.

Pair Corralation between Telecom Plus and Flow Traders

Assuming the 90 days trading horizon Telecom Plus PLC is expected to generate 0.66 times more return on investment than Flow Traders. However, Telecom Plus PLC is 1.52 times less risky than Flow Traders. It trades about -0.06 of its potential returns per unit of risk. Flow Traders NV is currently generating about -0.09 per unit of risk. If you would invest  194,277  in Telecom Plus PLC on May 16, 2025 and sell it today you would lose (11,277) from holding Telecom Plus PLC or give up 5.8% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.44%
Values	Daily Returns

Telecom Plus PLC  vs.  Flow Traders NV

Telecom Plus PLC

Risk-Adjusted Performance

Weakest

Over the last 90 days Telecom Plus PLC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Telecom Plus is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Flow Traders NV

Risk-Adjusted Performance

Weakest

Over the last 90 days Flow Traders NV has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Telecom Plus and Flow Traders

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

The idea behind Telecom Plus PLC and Flow Traders NV 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.