Correlation Between Standard Foods and Professional Computer
Can any of the company-specific risk be diversified away by investing in both Standard Foods and Professional Computer 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 Professional Computer 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 Professional Computer Technology, you can compare the effects of market volatilities on Standard Foods and Professional Computer 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 Professional Computer. Check out your portfolio center. Please also check ongoing floating volatility patterns of Standard Foods and Professional Computer.
Diversification Opportunities for Standard Foods and Professional Computer
0.88 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Standard and Professional is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Standard Foods Corp and Professional Computer Technolo in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Professional Computer 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 Professional Computer. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Professional Computer has no effect on the direction of Standard Foods i.e., Standard Foods and Professional Computer go up and down completely randomly.
Pair Corralation between Standard Foods and Professional Computer
Assuming the 90 days trading horizon Standard Foods Corp is expected to under-perform the Professional Computer. But the stock apears to be less risky and, when comparing its historical volatility, Standard Foods Corp is 2.63 times less risky than Professional Computer. The stock trades about -0.04 of its potential returns per unit of risk. The Professional Computer Technology is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest 2,275 in Professional Computer Technology on November 28, 2024 and sell it today you would earn a total of 250.00 from holding Professional Computer Technology or generate 10.99% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Standard Foods Corp vs. Professional Computer Technolo
Performance |
| Timeline |
| Standard Foods Corp |
| Professional Computer |
Standard Foods and Professional Computer Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Standard Foods and Professional Computer
The main advantage of trading using opposite Standard Foods and Professional Computer positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Standard Foods position performs unexpectedly, Professional Computer 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 Professional Computer will offset losses from the drop in Professional Computer'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 |
| Professional Computer vs. Sunspring Metal Corp | Professional Computer vs. Chunghwa Telecom Co | Professional Computer vs. Feng Ching Metal | Professional Computer vs. Chief Telecom |
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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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