Correlation Between EV Advanced and FoodNamoo

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

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

Diversification Opportunities for EV Advanced and FoodNamoo

0.76

Correlation Coefficient

EV Advanced  FoodNamoo

Poor diversification

The 3 months correlation between 131400 and FoodNamoo is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding EV Advanced Material and FoodNamoo in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FoodNamoo and EV Advanced 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 EV Advanced Material 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 EV Advanced i.e., EV Advanced and FoodNamoo go up and down completely randomly.

Pair Corralation between EV Advanced and FoodNamoo

Assuming the 90 days trading horizon EV Advanced Material is expected to generate 1.6 times more return on investment than FoodNamoo. However, EV Advanced is 1.6 times more volatile than FoodNamoo. It trades about 0.04 of its potential returns per unit of risk. FoodNamoo is currently generating about -0.05 per unit of risk. If you would invest  147,005  in EV Advanced Material on September 30, 2024 and sell it today you would earn a total of  31,695  from holding EV Advanced Material or generate 21.56% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.45%
Values	Daily Returns

EV Advanced Material  vs.  FoodNamoo

EV Advanced Material

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days EV Advanced Material 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 January 2025. The current disturbance may also be a sign of long term up-swing for the company 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 weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with EV Advanced and FoodNamoo

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

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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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.