Correlation Between AKD Hospitality and National Foods
Can any of the company-specific risk be diversified away by investing in both AKD Hospitality and National Foods 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 AKD Hospitality and National Foods into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between AKD Hospitality and National Foods, you can compare the effects of market volatilities on AKD Hospitality and National Foods 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 AKD Hospitality with a short position of National Foods. Check out your portfolio center. Please also check ongoing floating volatility patterns of AKD Hospitality and National Foods.
Diversification Opportunities for AKD Hospitality and National Foods
0.74 | Correlation Coefficient |
Poor diversification
The 3 months correlation between AKD and National is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding AKD Hospitality and National Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on National Foods and AKD Hospitality 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 AKD Hospitality are associated (or correlated) with National Foods. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of National Foods has no effect on the direction of AKD Hospitality i.e., AKD Hospitality and National Foods go up and down completely randomly.
Pair Corralation between AKD Hospitality and National Foods
Assuming the 90 days trading horizon AKD Hospitality is expected to generate 4.12 times more return on investment than National Foods. However, AKD Hospitality is 4.12 times more volatile than National Foods. It trades about 0.09 of its potential returns per unit of risk. National Foods is currently generating about -0.33 per unit of risk. If you would invest 14,708 in AKD Hospitality on November 9, 2024 and sell it today you would earn a total of 743.00 from holding AKD Hospitality or generate 5.05% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
AKD Hospitality vs. National Foods
Performance |
| Timeline |
| AKD Hospitality |
| National Foods |
AKD Hospitality and National Foods Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with AKD Hospitality and National Foods
The main advantage of trading using opposite AKD Hospitality and National Foods positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AKD Hospitality position performs unexpectedly, National Foods 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 National Foods will offset losses from the drop in National Foods' long position.| AKD Hospitality vs. Mari Petroleum | AKD Hospitality vs. Attock Petroleum | AKD Hospitality vs. Habib Insurance | AKD Hospitality vs. Ghandhara Automobile |
| National Foods vs. Wah Nobel Chemicals | National Foods vs. Beco Steel | National Foods vs. Oil and Gas | National Foods vs. Amreli Steels |
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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..
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