Correlation Between Standard Foods and PlayNitride

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

Diversification Opportunities for Standard Foods and PlayNitride

-0.84

Correlation Coefficient

Standard Foods  PlayNitride

Pay attention - limited upside

The 3 months correlation between Standard and PlayNitride is -0.84. Overlapping area represents the amount of risk that can be diversified away by holding Standard Foods Corp and PlayNitride in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PlayNitride 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 PlayNitride. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PlayNitride has no effect on the direction of Standard Foods i.e., Standard Foods and PlayNitride go up and down completely randomly.

Pair Corralation between Standard Foods and PlayNitride

Assuming the 90 days trading horizon Standard Foods Corp is expected to under-perform the PlayNitride. But the stock apears to be less risky and, when comparing its historical volatility, Standard Foods Corp is 6.8 times less risky than PlayNitride. The stock trades about -0.17 of its potential returns per unit of risk. The PlayNitride is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  16,800  in PlayNitride on October 22, 2024 and sell it today you would earn a total of  4,550  from holding PlayNitride or generate 27.08% return on investment over 90 days.

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

Standard Foods Corp  vs.  PlayNitride

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 latest abnormal performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

PlayNitride

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in PlayNitride are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, PlayNitride showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Standard Foods and PlayNitride

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

The idea behind Standard Foods Corp and PlayNitride 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.