Correlation Between Cult Food and Artisan Consumer
Can any of the company-specific risk be diversified away by investing in both Cult Food and Artisan Consumer 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 Cult Food and Artisan Consumer into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Cult Food Science and Artisan Consumer Goods, you can compare the effects of market volatilities on Cult Food and Artisan Consumer 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 Cult Food with a short position of Artisan Consumer. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cult Food and Artisan Consumer.
Diversification Opportunities for Cult Food and Artisan Consumer
0.47 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Cult and Artisan is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Cult Food Science and Artisan Consumer Goods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Artisan Consumer Goods and Cult Food 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 Cult Food Science are associated (or correlated) with Artisan Consumer. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Artisan Consumer Goods has no effect on the direction of Cult Food i.e., Cult Food and Artisan Consumer go up and down completely randomly.
Pair Corralation between Cult Food and Artisan Consumer
Assuming the 90 days horizon Cult Food Science is expected to generate 1.17 times more return on investment than Artisan Consumer. However, Cult Food is 1.17 times more volatile than Artisan Consumer Goods. It trades about 0.03 of its potential returns per unit of risk. Artisan Consumer Goods is currently generating about -0.22 per unit of risk. If you would invest 3.56 in Cult Food Science on September 2, 2024 and sell it today you would lose (0.02) from holding Cult Food Science or give up 0.56% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Cult Food Science vs. Artisan Consumer Goods
Performance |
| Timeline |
| Cult Food Science |
| Artisan Consumer Goods |
Cult Food and Artisan Consumer Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cult Food and Artisan Consumer
The main advantage of trading using opposite Cult Food and Artisan Consumer positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cult Food position performs unexpectedly, Artisan Consumer 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 Artisan Consumer will offset losses from the drop in Artisan Consumer's long position.The idea behind Cult Food Science and Artisan Consumer Goods 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.| Artisan Consumer vs. South32 Limited | Artisan Consumer vs. NioCorp Developments Ltd | Artisan Consumer vs. HUMANA INC | Artisan Consumer vs. SCOR PK |
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 Global Correlations module to find global opportunities by holding instruments from different markets.
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