Correlation Between VARIOUS EATERIES and CN MODERN

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

By analyzing existing cross correlation between VARIOUS EATERIES LS and CN MODERN DAIRY, you can compare the effects of market volatilities on VARIOUS EATERIES and CN MODERN 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 VARIOUS EATERIES with a short position of CN MODERN. Check out your portfolio center. Please also check ongoing floating volatility patterns of VARIOUS EATERIES and CN MODERN.

Diversification Opportunities for VARIOUS EATERIES and CN MODERN

-0.16

Correlation Coefficient

VARIOUS EATERIES  CN MODERN

Good diversification

The 3 months correlation between VARIOUS and 07M is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding VARIOUS EATERIES LS and CN MODERN DAIRY in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CN MODERN DAIRY and VARIOUS EATERIES 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 VARIOUS EATERIES LS are associated (or correlated) with CN MODERN. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CN MODERN DAIRY has no effect on the direction of VARIOUS EATERIES i.e., VARIOUS EATERIES and CN MODERN go up and down completely randomly.

Pair Corralation between VARIOUS EATERIES and CN MODERN

Assuming the 90 days horizon VARIOUS EATERIES LS is expected to under-perform the CN MODERN. But the stock apears to be less risky and, when comparing its historical volatility, VARIOUS EATERIES LS is 1.58 times less risky than CN MODERN. The stock trades about -0.09 of its potential returns per unit of risk. The CN MODERN DAIRY is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  8.39  in CN MODERN DAIRY on September 19, 2024 and sell it today you would earn a total of  2.61  from holding CN MODERN DAIRY or generate 31.11% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.66%
Values	Daily Returns

VARIOUS EATERIES LS  vs.  CN MODERN DAIRY

VARIOUS EATERIES

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days VARIOUS EATERIES LS has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, VARIOUS EATERIES is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

CN MODERN DAIRY

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in CN MODERN DAIRY are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile primary indicators, CN MODERN exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with VARIOUS EATERIES and CN MODERN

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

The idea behind VARIOUS EATERIES LS and CN MODERN DAIRY 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.