Correlation Between Nature and FoodNamoo

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

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

Diversification Opportunities for Nature and FoodNamoo

0.67

Correlation Coefficient

Nature  FoodNamoo

Poor diversification

The 3 months correlation between Nature and FoodNamoo is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Nature and Environment and FoodNamoo in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FoodNamoo and Nature 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 Nature and Environment 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 Nature i.e., Nature and FoodNamoo go up and down completely randomly.

Pair Corralation between Nature and FoodNamoo

Assuming the 90 days trading horizon Nature and Environment is expected to generate 1.22 times more return on investment than FoodNamoo. However, Nature is 1.22 times more volatile than FoodNamoo. It trades about 0.1 of its potential returns per unit of risk. FoodNamoo is currently generating about -0.19 per unit of risk. If you would invest  59,000  in Nature and Environment on September 21, 2024 and sell it today you would earn a total of  3,800  from holding Nature and Environment or generate 6.44% return on investment over 90 days.

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

Nature and Environment  vs.  FoodNamoo

Nature and Environment

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Nature and Environment has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Nature 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

0 of 100

Very Weak

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

Pair Trading with Nature and FoodNamoo

The main advantage of trading using opposite Nature and FoodNamoo positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nature 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 Nature and Environment 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.

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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.