Correlation Between Standard Foods and Giant Manufacturing
Can any of the company-specific risk be diversified away by investing in both Standard Foods and Giant Manufacturing 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 Giant Manufacturing 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 Giant Manufacturing Co, you can compare the effects of market volatilities on Standard Foods and Giant Manufacturing 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 Giant Manufacturing. Check out your portfolio center. Please also check ongoing floating volatility patterns of Standard Foods and Giant Manufacturing.
Diversification Opportunities for Standard Foods and Giant Manufacturing
0.74 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Standard and Giant is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Standard Foods Corp and Giant Manufacturing Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Giant Manufacturing 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 Giant Manufacturing. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Giant Manufacturing has no effect on the direction of Standard Foods i.e., Standard Foods and Giant Manufacturing go up and down completely randomly.
Pair Corralation between Standard Foods and Giant Manufacturing
Assuming the 90 days trading horizon Standard Foods Corp is expected to generate 0.41 times more return on investment than Giant Manufacturing. However, Standard Foods Corp is 2.44 times less risky than Giant Manufacturing. It trades about -0.01 of its potential returns per unit of risk. Giant Manufacturing Co is currently generating about -0.03 per unit of risk. If you would invest 4,065 in Standard Foods Corp on August 25, 2024 and sell it today you would lose (285.00) from holding Standard Foods Corp or give up 7.01% 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. Giant Manufacturing Co
Performance |
| Timeline |
| Standard Foods Corp |
| Giant Manufacturing |
Standard Foods and Giant Manufacturing Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Standard Foods and Giant Manufacturing
The main advantage of trading using opposite Standard Foods and Giant Manufacturing positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Standard Foods position performs unexpectedly, Giant Manufacturing 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 Giant Manufacturing will offset losses from the drop in Giant Manufacturing'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 |
| Giant Manufacturing vs. Merida Industry Co | Giant Manufacturing vs. President Chain Store | Giant Manufacturing vs. Cheng Shin Rubber | Giant Manufacturing vs. Uni President Enterprises Corp |
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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .
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