Correlation Between Standard Foods and LandMark Optoelectronics

Can any of the company-specific risk be diversified away by investing in both Standard Foods and LandMark Optoelectronics 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 LandMark Optoelectronics 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 LandMark Optoelectronics, you can compare the effects of market volatilities on Standard Foods and LandMark Optoelectronics 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 LandMark Optoelectronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Standard Foods and LandMark Optoelectronics.

Diversification Opportunities for Standard Foods and LandMark Optoelectronics

-0.67

Correlation Coefficient

Standard Foods  LandMark Optoelectronics

Excellent diversification

The 3 months correlation between Standard and LandMark is -0.67. Overlapping area represents the amount of risk that can be diversified away by holding Standard Foods Corp and LandMark Optoelectronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LandMark Optoelectronics 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 LandMark Optoelectronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LandMark Optoelectronics has no effect on the direction of Standard Foods i.e., Standard Foods and LandMark Optoelectronics go up and down completely randomly.

Pair Corralation between Standard Foods and LandMark Optoelectronics

Assuming the 90 days trading horizon Standard Foods Corp is expected to under-perform the LandMark Optoelectronics. But the stock apears to be less risky and, when comparing its historical volatility, Standard Foods Corp is 4.28 times less risky than LandMark Optoelectronics. The stock trades about -0.03 of its potential returns per unit of risk. The LandMark Optoelectronics is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  11,134  in LandMark Optoelectronics on December 4, 2024 and sell it today you would earn a total of  23,266  from holding LandMark Optoelectronics or generate 208.96% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	99.79%
Values	Daily Returns

Standard Foods Corp  vs.  LandMark Optoelectronics

Standard Foods Corp

Risk-Adjusted Performance

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.

LandMark Optoelectronics

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Standard Foods and LandMark Optoelectronics

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

The idea behind Standard Foods Corp and LandMark Optoelectronics 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.