Correlation Between Leaders Technology and FoodNamoo

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

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

Diversification Opportunities for Leaders Technology and FoodNamoo

0.51

Correlation Coefficient

Leaders Technology  FoodNamoo

Very weak diversification

The 3 months correlation between Leaders and FoodNamoo is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Leaders Technology Investment and FoodNamoo in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FoodNamoo and Leaders Technology 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 Leaders Technology Investment are associated (or correlated) with FoodNamoo. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FoodNamoo has no effect on the direction of Leaders Technology i.e., Leaders Technology and FoodNamoo go up and down completely randomly.

Pair Corralation between Leaders Technology and FoodNamoo

Assuming the 90 days trading horizon Leaders Technology Investment is expected to generate 1.4 times more return on investment than FoodNamoo. However, Leaders Technology is 1.4 times more volatile than FoodNamoo. It trades about -0.01 of its potential returns per unit of risk. FoodNamoo is currently generating about -0.05 per unit of risk. If you would invest  29,000  in Leaders Technology Investment on December 26, 2024 and sell it today you would lose (2,900) from holding Leaders Technology Investment or give up 10.0% of portfolio value over 90 days.

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

Leaders Technology Investment  vs.  FoodNamoo

Leaders Technology

Risk-Adjusted Performance

Very Weak

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

FoodNamoo

Risk-Adjusted Performance

Very Weak

Over the last 90 days FoodNamoo has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Leaders Technology and FoodNamoo

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

The idea behind Leaders Technology Investment and FoodNamoo 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.

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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..