Correlation Between Standard Foods and Advantech

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

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

Diversification Opportunities for Standard Foods and Advantech

-0.27

Correlation Coefficient

Standard Foods  Advantech

Very good diversification

The 3 months correlation between Standard and Advantech is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding Standard Foods Corp and Advantech Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Advantech and Standard Foods 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 Standard Foods Corp are associated (or correlated) with Advantech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Advantech has no effect on the direction of Standard Foods i.e., Standard Foods and Advantech go up and down completely randomly.

Pair Corralation between Standard Foods and Advantech

Assuming the 90 days trading horizon Standard Foods Corp is expected to under-perform the Advantech. But the stock apears to be less risky and, when comparing its historical volatility, Standard Foods Corp is 2.59 times less risky than Advantech. The stock trades about -0.09 of its potential returns per unit of risk. The Advantech Co is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  32,550  in Advantech Co on September 15, 2024 and sell it today you would earn a total of  2,700  from holding Advantech Co or generate 8.29% return on investment over 90 days.

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

Standard Foods Corp  vs.  Advantech Co

Standard Foods Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Standard Foods Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Standard Foods is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Advantech

Risk-Adjusted Performance

7 of 100

OK

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

Pair Trading with Standard Foods and Advantech

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

The idea behind Standard Foods Corp and Advantech 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.

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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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.