Correlation Between FOODWELL and RedcapTour

Can any of the company-specific risk be diversified away by investing in both FOODWELL and RedcapTour 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 FOODWELL and RedcapTour into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between FOODWELL Co and RedcapTour Co, you can compare the effects of market volatilities on FOODWELL and RedcapTour 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 FOODWELL with a short position of RedcapTour. Check out your portfolio center. Please also check ongoing floating volatility patterns of FOODWELL and RedcapTour.

Diversification Opportunities for FOODWELL and RedcapTour

-0.36

Correlation Coefficient

FOODWELL  RedcapTour

Very good diversification

The 3 months correlation between FOODWELL and RedcapTour is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding FOODWELL Co and RedcapTour Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RedcapTour and FOODWELL 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 FOODWELL Co are associated (or correlated) with RedcapTour. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RedcapTour has no effect on the direction of FOODWELL i.e., FOODWELL and RedcapTour go up and down completely randomly.

Pair Corralation between FOODWELL and RedcapTour

Assuming the 90 days trading horizon FOODWELL Co is expected to generate 0.92 times more return on investment than RedcapTour. However, FOODWELL Co is 1.09 times less risky than RedcapTour. It trades about 0.34 of its potential returns per unit of risk. RedcapTour Co is currently generating about -0.09 per unit of risk. If you would invest  470,564  in FOODWELL Co on October 8, 2024 and sell it today you would earn a total of  47,436  from holding FOODWELL Co or generate 10.08% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

FOODWELL Co  vs.  RedcapTour Co

FOODWELL

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days FOODWELL Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, FOODWELL is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

RedcapTour

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in RedcapTour Co are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, RedcapTour may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with FOODWELL and RedcapTour

The main advantage of trading using opposite FOODWELL and RedcapTour positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if FOODWELL position performs unexpectedly, RedcapTour 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 RedcapTour will offset losses from the drop in RedcapTour's long position.

The idea behind FOODWELL Co and RedcapTour 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.