Correlation Between President Chain and Gourmet Master
Can any of the company-specific risk be diversified away by investing in both President Chain 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 President Chain and Gourmet Master into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between President Chain Store and Gourmet Master Co, you can compare the effects of market volatilities on President Chain 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 President Chain with a short position of Gourmet Master. Check out your portfolio center. Please also check ongoing floating volatility patterns of President Chain and Gourmet Master.
Diversification Opportunities for President Chain and Gourmet Master
-0.65 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between President and Gourmet is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding President Chain Store and Gourmet Master Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gourmet Master and President Chain 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 President Chain Store 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 President Chain i.e., President Chain and Gourmet Master go up and down completely randomly.
Pair Corralation between President Chain and Gourmet Master
Assuming the 90 days trading horizon President Chain Store is expected to under-perform the Gourmet Master. But the stock apears to be less risky and, when comparing its historical volatility, President Chain Store is 4.39 times less risky than Gourmet Master. The stock trades about -0.14 of its potential returns per unit of risk. The Gourmet Master Co is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest 9,650 in Gourmet Master Co on November 3, 2024 and sell it today you would earn a total of 750.00 from holding Gourmet Master Co or generate 7.77% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
President Chain Store vs. Gourmet Master Co
Performance |
| Timeline |
| President Chain Store |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
| Gourmet Master |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
President Chain and Gourmet Master Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with President Chain and Gourmet Master
The main advantage of trading using opposite President Chain and Gourmet Master positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if President Chain 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.The idea behind President Chain Store and Gourmet Master Co 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.
Other Complementary Tools
| Portfolio Manager State of the art Portfolio Manager to monitor and improve performance of your invested capital | |
| Idea Optimizer Use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio | |
| Stock Screener Find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook. | |
| Top Crypto Exchanges Search and analyze digital assets across top global cryptocurrency exchanges | |
| Commodity Directory Find actively traded commodities issued by global exchanges |