Correlation Between Reward Wool and Gourmet Master
Can any of the company-specific risk be diversified away by investing in both Reward Wool and Gourmet Master 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 Reward Wool and Gourmet Master into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Reward Wool Industry and Gourmet Master Co, you can compare the effects of market volatilities on Reward Wool and Gourmet Master 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 Reward Wool with a short position of Gourmet Master. Check out your portfolio center. Please also check ongoing floating volatility patterns of Reward Wool and Gourmet Master.
Diversification Opportunities for Reward Wool and Gourmet Master
-0.68 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Reward and Gourmet is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding Reward Wool Industry and Gourmet Master Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gourmet Master and Reward Wool 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 Reward Wool Industry are associated (or correlated) with Gourmet Master. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gourmet Master has no effect on the direction of Reward Wool i.e., Reward Wool and Gourmet Master go up and down completely randomly.
Pair Corralation between Reward Wool and Gourmet Master
Assuming the 90 days trading horizon Reward Wool Industry is expected to under-perform the Gourmet Master. But the stock apears to be less risky and, when comparing its historical volatility, Reward Wool Industry is 1.67 times less risky than Gourmet Master. The stock trades about -0.32 of its potential returns per unit of risk. The Gourmet Master Co is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest 8,850 in Gourmet Master Co on August 31, 2024 and sell it today you would earn a total of 520.00 from holding Gourmet Master Co or generate 5.88% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Reward Wool Industry vs. Gourmet Master Co
Performance |
| Timeline |
| Reward Wool Industry |
| Gourmet Master |
Reward Wool and Gourmet Master Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Reward Wool and Gourmet Master
The main advantage of trading using opposite Reward Wool and Gourmet Master positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Reward Wool position performs unexpectedly, Gourmet Master 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 Gourmet Master will offset losses from the drop in Gourmet Master's long position.| Reward Wool vs. Tung Ho Textile | Reward Wool vs. Carnival Industrial Corp | Reward Wool vs. Yi Jinn Industrial | Reward Wool vs. Tah Tong Textile |
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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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.
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