Correlation Between Apex Frozen and Fairchem Organics

Can any of the company-specific risk be diversified away by investing in both Apex Frozen and Fairchem Organics 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 Apex Frozen and Fairchem Organics into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Apex Frozen Foods and Fairchem Organics Limited, you can compare the effects of market volatilities on Apex Frozen and Fairchem Organics 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 Apex Frozen with a short position of Fairchem Organics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Apex Frozen and Fairchem Organics.

Diversification Opportunities for Apex Frozen and Fairchem Organics

0.29

Correlation Coefficient

Apex Frozen  Fairchem Organics

Modest diversification

The 3 months correlation between Apex and Fairchem is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Apex Frozen Foods and Fairchem Organics Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fairchem Organics and Apex Frozen 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 Apex Frozen Foods are associated (or correlated) with Fairchem Organics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fairchem Organics has no effect on the direction of Apex Frozen i.e., Apex Frozen and Fairchem Organics go up and down completely randomly.

Pair Corralation between Apex Frozen and Fairchem Organics

Assuming the 90 days trading horizon Apex Frozen Foods is expected to generate 0.62 times more return on investment than Fairchem Organics. However, Apex Frozen Foods is 1.63 times less risky than Fairchem Organics. It trades about 0.06 of its potential returns per unit of risk. Fairchem Organics Limited is currently generating about 0.01 per unit of risk. If you would invest  24,600  in Apex Frozen Foods on September 19, 2024 and sell it today you would earn a total of  2,191  from holding Apex Frozen Foods or generate 8.91% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Apex Frozen Foods  vs.  Fairchem Organics Limited

Apex Frozen Foods

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Apex Frozen Foods are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Apex Frozen may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Fairchem Organics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Fairchem Organics Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound primary indicators, Fairchem Organics is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Apex Frozen and Fairchem Organics

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

The idea behind Apex Frozen Foods and Fairchem Organics Limited 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.