Correlation Between Edita Food and Virgin Wines
Can any of the company-specific risk be diversified away by investing in both Edita Food and Virgin Wines 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 Edita Food and Virgin Wines into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Edita Food Industries and Virgin Wines UK, you can compare the effects of market volatilities on Edita Food and Virgin Wines 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 Edita Food with a short position of Virgin Wines. Check out your portfolio center. Please also check ongoing floating volatility patterns of Edita Food and Virgin Wines.
Diversification Opportunities for Edita Food and Virgin Wines
0.39 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Edita and Virgin is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Edita Food Industries and Virgin Wines UK in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Virgin Wines UK and Edita 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 Edita Food Industries are associated (or correlated) with Virgin Wines. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Virgin Wines UK has no effect on the direction of Edita Food i.e., Edita Food and Virgin Wines go up and down completely randomly.
Pair Corralation between Edita Food and Virgin Wines
Assuming the 90 days trading horizon Edita Food Industries is expected to generate 1.09 times more return on investment than Virgin Wines. However, Edita Food is 1.09 times more volatile than Virgin Wines UK. It trades about 0.01 of its potential returns per unit of risk. Virgin Wines UK is currently generating about -0.04 per unit of risk. If you would invest 207.00 in Edita Food Industries on August 28, 2024 and sell it today you would lose (7.00) from holding Edita Food Industries or give up 3.38% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Edita Food Industries vs. Virgin Wines UK
Performance |
| Timeline |
| Edita Food Industries |
| Virgin Wines UK |
Edita Food and Virgin Wines Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Edita Food and Virgin Wines
The main advantage of trading using opposite Edita Food and Virgin Wines positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Edita Food position performs unexpectedly, Virgin Wines 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 Virgin Wines will offset losses from the drop in Virgin Wines' long position.| Edita Food vs. Samsung Electronics Co | Edita Food vs. Samsung Electronics Co | Edita Food vs. Hyundai Motor | Edita Food vs. Toyota Motor Corp |
| Virgin Wines vs. Samsung Electronics Co | Virgin Wines vs. Samsung Electronics Co | Virgin Wines vs. Hyundai Motor | Virgin Wines vs. Toyota Motor Corp |
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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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