Correlation Between Standard Foods and Chief Telecom
Can any of the company-specific risk be diversified away by investing in both Standard Foods and Chief Telecom 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 Chief Telecom 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 Chief Telecom, you can compare the effects of market volatilities on Standard Foods and Chief Telecom 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 Chief Telecom. Check out your portfolio center. Please also check ongoing floating volatility patterns of Standard Foods and Chief Telecom.
Diversification Opportunities for Standard Foods and Chief Telecom
0.79 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Standard and Chief is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Standard Foods Corp and Chief Telecom in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chief Telecom 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 Chief Telecom. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chief Telecom has no effect on the direction of Standard Foods i.e., Standard Foods and Chief Telecom go up and down completely randomly.
Pair Corralation between Standard Foods and Chief Telecom
Assuming the 90 days trading horizon Standard Foods Corp is expected to generate 0.36 times more return on investment than Chief Telecom. However, Standard Foods Corp is 2.75 times less risky than Chief Telecom. It trades about -0.33 of its potential returns per unit of risk. Chief Telecom is currently generating about -0.22 per unit of risk. If you would invest 3,625 in Standard Foods Corp on November 7, 2024 and sell it today you would lose (170.00) from holding Standard Foods Corp or give up 4.69% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Standard Foods Corp vs. Chief Telecom
Performance |
| Timeline |
| Standard Foods Corp |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
| Chief Telecom |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Standard Foods and Chief Telecom Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Standard Foods and Chief Telecom
The main advantage of trading using opposite Standard Foods and Chief Telecom positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Standard Foods position performs unexpectedly, Chief Telecom 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 Chief Telecom will offset losses from the drop in Chief Telecom's long position.The idea behind Standard Foods Corp and Chief Telecom 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.
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