Correlation Between Eastroc Beverage and Ligao Foods

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Can any of the company-specific risk be diversified away by investing in both Eastroc Beverage and Ligao Foods 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 Eastroc Beverage and Ligao Foods into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Eastroc Beverage Group and Ligao Foods CoLtd, you can compare the effects of market volatilities on Eastroc Beverage and Ligao Foods 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 Eastroc Beverage with a short position of Ligao Foods. Check out your portfolio center. Please also check ongoing floating volatility patterns of Eastroc Beverage and Ligao Foods.

Diversification Opportunities for Eastroc Beverage and Ligao Foods

EastrocLigaoDiversified AwayEastrocLigaoDiversified Away100%
0.94
  Correlation Coefficient

Almost no diversification

The 3 months correlation between Eastroc and Ligao is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Eastroc Beverage Group and Ligao Foods CoLtd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ligao Foods CoLtd and Eastroc Beverage 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 Eastroc Beverage Group are associated (or correlated) with Ligao Foods. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ligao Foods CoLtd has no effect on the direction of Eastroc Beverage i.e., Eastroc Beverage and Ligao Foods go up and down completely randomly.

Pair Corralation between Eastroc Beverage and Ligao Foods

Assuming the 90 days trading horizon Eastroc Beverage is expected to generate 1.87 times less return on investment than Ligao Foods. But when comparing it to its historical volatility, Eastroc Beverage Group is 1.91 times less risky than Ligao Foods. It trades about 0.27 of its potential returns per unit of risk. Ligao Foods CoLtd is currently generating about 0.26 of returns per unit of risk over similar time horizon. If you would invest  2,424  in Ligao Foods CoLtd on September 14, 2024 and sell it today you would earn a total of  2,226  from holding Ligao Foods CoLtd or generate 91.83% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Strong
Accuracy98.28%
ValuesDaily Returns

Eastroc Beverage Group  vs.  Ligao Foods CoLtd

 Performance 
JavaScript chart by amCharts 3.21.15OctNov 0204060
JavaScript chart by amCharts 3.21.15605499 300973
       Timeline  
Eastroc Beverage 

Risk-Adjusted Performance

21 of 100

 
Weak
 
Strong
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in Eastroc Beverage Group are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Eastroc Beverage sustained solid returns over the last few months and may actually be approaching a breakup point.
JavaScript chart by amCharts 3.21.15OctNovDecNovDec170180190200210220230240250
Ligao Foods CoLtd 

Risk-Adjusted Performance

20 of 100

 
Weak
 
Strong
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in Ligao Foods CoLtd are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Ligao Foods sustained solid returns over the last few months and may actually be approaching a breakup point.
JavaScript chart by amCharts 3.21.15OctNovDecNovDec2530354045

Eastroc Beverage and Ligao Foods Volatility Contrast

   Predicted Return Density   
JavaScript chart by amCharts 3.21.15-7.09-5.31-3.53-1.750.01.923.915.897.889.87 0.020.030.040.050.060.07
JavaScript chart by amCharts 3.21.15605499 300973
       Returns  

Pair Trading with Eastroc Beverage and Ligao Foods

The main advantage of trading using opposite Eastroc Beverage and Ligao Foods positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Eastroc Beverage position performs unexpectedly, Ligao Foods 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 Ligao Foods will offset losses from the drop in Ligao Foods' long position.
The idea behind Eastroc Beverage Group and Ligao Foods CoLtd 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.

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