Correlation Between ABCO Electronics and CJ Seafood

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

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

Diversification Opportunities for ABCO Electronics and CJ Seafood

0.64

Correlation Coefficient

ABCO Electronics  CJ Seafood

Poor diversification

The 3 months correlation between ABCO and 011150 is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding ABCO Electronics Co and CJ Seafood Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CJ Seafood Corp and ABCO Electronics 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 ABCO Electronics Co are associated (or correlated) with CJ Seafood. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CJ Seafood Corp has no effect on the direction of ABCO Electronics i.e., ABCO Electronics and CJ Seafood go up and down completely randomly.

Pair Corralation between ABCO Electronics and CJ Seafood

Assuming the 90 days trading horizon ABCO Electronics Co is expected to generate 1.17 times more return on investment than CJ Seafood. However, ABCO Electronics is 1.17 times more volatile than CJ Seafood Corp. It trades about 0.09 of its potential returns per unit of risk. CJ Seafood Corp is currently generating about -0.01 per unit of risk. If you would invest  491,500  in ABCO Electronics Co on October 25, 2024 and sell it today you would earn a total of  75,500  from holding ABCO Electronics Co or generate 15.36% return on investment over 90 days.

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

ABCO Electronics Co  vs.  CJ Seafood Corp

ABCO Electronics

Risk-Adjusted Performance

7 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in ABCO Electronics Co are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, ABCO Electronics sustained solid returns over the last few months and may actually be approaching a breakup point.

CJ Seafood Corp

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with ABCO Electronics and CJ Seafood

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

The idea behind ABCO Electronics Co and CJ Seafood Corp 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.