Correlation Between Food Life and Lerøy Seafood

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

By analyzing existing cross correlation between Food Life Companies and Lery Seafood Group, you can compare the effects of market volatilities on Food Life and Lerøy Seafood 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 Food Life with a short position of Lerøy Seafood. Check out your portfolio center. Please also check ongoing floating volatility patterns of Food Life and Lerøy Seafood.

Diversification Opportunities for Food Life and Lerøy Seafood

0.58

Correlation Coefficient

Food Life  Lerøy Seafood

Very weak diversification

The 3 months correlation between Food and Lerøy is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Food Life Companies and Lery Seafood Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lery Seafood Group and Food Life 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 Food Life Companies are associated (or correlated) with Lerøy Seafood. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lery Seafood Group has no effect on the direction of Food Life i.e., Food Life and Lerøy Seafood go up and down completely randomly.

Pair Corralation between Food Life and Lerøy Seafood

Assuming the 90 days horizon Food Life is expected to generate 9.37 times less return on investment than Lerøy Seafood. But when comparing it to its historical volatility, Food Life Companies is 3.31 times less risky than Lerøy Seafood. It trades about 0.02 of its potential returns per unit of risk. Lery Seafood Group is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  90.00  in Lery Seafood Group on September 4, 2024 and sell it today you would earn a total of  348.00  from holding Lery Seafood Group or generate 386.67% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	99.8%
Values	Daily Returns

Food Life Companies  vs.  Lery Seafood Group

Food Life Companies

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Food Life Companies are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Food Life reported solid returns over the last few months and may actually be approaching a breakup point.

Lery Seafood Group

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Lery Seafood Group are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Lerøy Seafood may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Food Life and Lerøy Seafood

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

The idea behind Food Life Companies and Lery Seafood Group 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.