Correlation Between Above Food and Analog Devices

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

By analyzing existing cross correlation between Above Food Ingredients and Analog Devices, you can compare the effects of market volatilities on Above Food and Analog Devices 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 Above Food with a short position of Analog Devices. Check out your portfolio center. Please also check ongoing floating volatility patterns of Above Food and Analog Devices.

Diversification Opportunities for Above Food and Analog Devices

-0.21

Correlation Coefficient

Above Food  Analog Devices

Very good diversification

The 3 months correlation between Above and Analog is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding Above Food Ingredients and Analog Devices in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Analog Devices and Above Food 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 Above Food Ingredients are associated (or correlated) with Analog Devices. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Analog Devices has no effect on the direction of Above Food i.e., Above Food and Analog Devices go up and down completely randomly.

Pair Corralation between Above Food and Analog Devices

Assuming the 90 days horizon Above Food Ingredients is expected to generate 14.95 times more return on investment than Analog Devices. However, Above Food is 14.95 times more volatile than Analog Devices. It trades about 0.15 of its potential returns per unit of risk. Analog Devices is currently generating about 0.0 per unit of risk. If you would invest  1.61  in Above Food Ingredients on October 25, 2024 and sell it today you would earn a total of  1.19  from holding Above Food Ingredients or generate 73.91% return on investment over 90 days.

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

Above Food Ingredients  vs.  Analog Devices

Above Food Ingredients

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Above Food Ingredients are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile technical and fundamental indicators, Above Food showed solid returns over the last few months and may actually be approaching a breakup point.

Analog Devices

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Analog Devices has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong fundamental indicators, Analog Devices is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Above Food and Analog Devices

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

The idea behind Above Food Ingredients and Analog Devices 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.