Correlation Between Total Soft and CKH Food

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

By analyzing existing cross correlation between Total Soft Bank and CKH Food Health, you can compare the effects of market volatilities on Total Soft and CKH Food 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 Total Soft with a short position of CKH Food. Check out your portfolio center. Please also check ongoing floating volatility patterns of Total Soft and CKH Food.

Diversification Opportunities for Total Soft and CKH Food

-0.63

Correlation Coefficient

Total Soft  CKH Food

Excellent diversification

The 3 months correlation between Total and CKH is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding Total Soft Bank and CKH Food Health in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CKH Food Health and Total Soft 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 Total Soft Bank are associated (or correlated) with CKH Food. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CKH Food Health has no effect on the direction of Total Soft i.e., Total Soft and CKH Food go up and down completely randomly.

Pair Corralation between Total Soft and CKH Food

Assuming the 90 days trading horizon Total Soft Bank is expected to generate 2.86 times more return on investment than CKH Food. However, Total Soft is 2.86 times more volatile than CKH Food Health. It trades about 0.15 of its potential returns per unit of risk. CKH Food Health is currently generating about -0.15 per unit of risk. If you would invest  515,000  in Total Soft Bank on October 4, 2024 and sell it today you would earn a total of  428,000  from holding Total Soft Bank or generate 83.11% return on investment over 90 days.

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

Total Soft Bank  vs.  CKH Food Health

Total Soft Bank

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Total Soft Bank are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Total Soft sustained solid returns over the last few months and may actually be approaching a breakup point.

CKH Food Health

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CKH Food Health has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Total Soft and CKH Food

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

The idea behind Total Soft Bank and CKH Food Health 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.