Correlation Between Food Life and INFORMATION SVC
Can any of the company-specific risk be diversified away by investing in both Food Life and INFORMATION SVC 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 Food Life and INFORMATION SVC into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Food Life Companies and INFORMATION SVC GRP, you can compare the effects of market volatilities on Food Life and INFORMATION SVC 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 Food Life with a short position of INFORMATION SVC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Food Life and INFORMATION SVC.
Diversification Opportunities for Food Life and INFORMATION SVC
0.96 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Food and INFORMATION is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding Food Life Companies and INFORMATION SVC GRP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on INFORMATION SVC GRP and Food Life 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 Food Life Companies are associated (or correlated) with INFORMATION SVC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of INFORMATION SVC GRP has no effect on the direction of Food Life i.e., Food Life and INFORMATION SVC go up and down completely randomly.
Pair Corralation between Food Life and INFORMATION SVC
Assuming the 90 days horizon Food Life Companies is expected to generate 1.06 times more return on investment than INFORMATION SVC. However, Food Life is 1.06 times more volatile than INFORMATION SVC GRP. It trades about 0.22 of its potential returns per unit of risk. INFORMATION SVC GRP is currently generating about -0.08 per unit of risk. If you would invest 1,940 in Food Life Companies on September 26, 2024 and sell it today you would earn a total of 160.00 from holding Food Life Companies or generate 8.25% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Food Life Companies vs. INFORMATION SVC GRP
Performance |
| Timeline |
| Food Life Companies |
| INFORMATION SVC GRP |
Food Life and INFORMATION SVC Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Food Life and INFORMATION SVC
The main advantage of trading using opposite Food Life and INFORMATION SVC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Food Life position performs unexpectedly, INFORMATION SVC 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 INFORMATION SVC will offset losses from the drop in INFORMATION SVC's long position.The idea behind Food Life Companies and INFORMATION SVC GRP 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.| INFORMATION SVC vs. Apple Inc | INFORMATION SVC vs. Apple Inc | INFORMATION SVC vs. Microsoft | INFORMATION SVC vs. Microsoft |
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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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