Correlation Between Wei Chuan and Standard Foods
Can any of the company-specific risk be diversified away by investing in both Wei Chuan and Standard Foods 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 Wei Chuan and Standard Foods into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Wei Chuan Foods and Standard Foods Corp, you can compare the effects of market volatilities on Wei Chuan and Standard Foods 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 Wei Chuan with a short position of Standard Foods. Check out your portfolio center. Please also check ongoing floating volatility patterns of Wei Chuan and Standard Foods.
Diversification Opportunities for Wei Chuan and Standard Foods
0.58 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Wei and Standard is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Wei Chuan Foods and Standard Foods Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Standard Foods Corp and Wei Chuan 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 Wei Chuan Foods are associated (or correlated) with Standard Foods. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Standard Foods Corp has no effect on the direction of Wei Chuan i.e., Wei Chuan and Standard Foods go up and down completely randomly.
Pair Corralation between Wei Chuan and Standard Foods
Assuming the 90 days trading horizon Wei Chuan Foods is expected to under-perform the Standard Foods. But the stock apears to be less risky and, when comparing its historical volatility, Wei Chuan Foods is 1.45 times less risky than Standard Foods. The stock trades about -0.04 of its potential returns per unit of risk. The Standard Foods Corp is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest 4,105 in Standard Foods Corp on September 2, 2024 and sell it today you would lose (350.00) from holding Standard Foods Corp or give up 8.53% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Wei Chuan Foods vs. Standard Foods Corp
Performance |
| Timeline |
| Wei Chuan Foods |
| Standard Foods Corp |
Wei Chuan and Standard Foods Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Wei Chuan and Standard Foods
The main advantage of trading using opposite Wei Chuan and Standard Foods positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Wei Chuan position performs unexpectedly, Standard Foods 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 Standard Foods will offset losses from the drop in Standard Foods' long position.| Wei Chuan vs. Uni President Enterprises Corp | Wei Chuan vs. Taisun Enterprise Co | Wei Chuan vs. AGV Products Corp | Wei Chuan vs. Great Wall Enterprise |
| Standard Foods vs. Uni President Enterprises Corp | Standard Foods vs. TTET Union Corp | Standard Foods vs. President Chain Store | Standard Foods vs. Charoen Pokphand Enterprise |
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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..
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