Correlation Between Standard Foods and Wei Chuan
Can any of the company-specific risk be diversified away by investing in both Standard Foods and Wei Chuan 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 Standard Foods and Wei Chuan into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Standard Foods Corp and Wei Chuan Foods, you can compare the effects of market volatilities on Standard Foods and Wei Chuan 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 Standard Foods with a short position of Wei Chuan. Check out your portfolio center. Please also check ongoing floating volatility patterns of Standard Foods and Wei Chuan.
Diversification Opportunities for Standard Foods and Wei Chuan
0.58 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Standard and Wei is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Standard Foods Corp and Wei Chuan Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wei Chuan Foods and Standard Foods 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 Standard Foods Corp are associated (or correlated) with Wei Chuan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wei Chuan Foods has no effect on the direction of Standard Foods i.e., Standard Foods and Wei Chuan go up and down completely randomly.
Pair Corralation between Standard Foods and Wei Chuan
Assuming the 90 days trading horizon Standard Foods Corp is expected to generate 1.45 times more return on investment than Wei Chuan. However, Standard Foods is 1.45 times more volatile than Wei Chuan Foods. It trades about -0.02 of its potential returns per unit of risk. Wei Chuan Foods is currently generating about -0.04 per unit of risk. 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 |
Standard Foods Corp vs. Wei Chuan Foods
Performance |
| Timeline |
| Standard Foods Corp |
| Wei Chuan Foods |
Standard Foods and Wei Chuan Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Standard Foods and Wei Chuan
The main advantage of trading using opposite Standard Foods and Wei Chuan positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Standard Foods position performs unexpectedly, Wei Chuan 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 Wei Chuan will offset losses from the drop in Wei Chuan's long position.| 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 |
| 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 |
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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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