Correlation Between Above Food and Borealis Foods

Can any of the company-specific risk be diversified away by investing in both Above Food and Borealis 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 Above Food and Borealis Foods 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 Borealis Foods, you can compare the effects of market volatilities on Above Food and Borealis 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 Above Food with a short position of Borealis Foods. Check out your portfolio center. Please also check ongoing floating volatility patterns of Above Food and Borealis Foods.

Diversification Opportunities for Above Food and Borealis Foods

0.45

Correlation Coefficient

Above Food  Borealis Foods

Very weak diversification

The 3 months correlation between Above and Borealis is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Above Food Ingredients and Borealis Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Borealis Foods 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 Borealis Foods. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Borealis Foods has no effect on the direction of Above Food i.e., Above Food and Borealis Foods go up and down completely randomly.

Pair Corralation between Above Food and Borealis Foods

Assuming the 90 days horizon Above Food is expected to generate 1.84 times less return on investment than Borealis Foods. In addition to that, Above Food is 1.77 times more volatile than Borealis Foods. It trades about 0.06 of its total potential returns per unit of risk. Borealis Foods is currently generating about 0.2 per unit of volatility. If you would invest  7.00  in Borealis Foods on December 30, 2024 and sell it today you would earn a total of  5.00  from holding Borealis Foods or generate 71.43% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	83.87%
Values	Daily Returns

Above Food Ingredients  vs.  Borealis Foods

Above Food Ingredients

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Above Food Ingredients are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly conflicting technical and fundamental indicators, Above Food showed solid returns over the last few months and may actually be approaching a breakup point.

Borealis Foods

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Borealis Foods are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Borealis Foods showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Above Food and Borealis Foods

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

The idea behind Above Food Ingredients and Borealis Foods 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.