Correlation Between Apex Frozen and Wonder Electricals

Can any of the company-specific risk be diversified away by investing in both Apex Frozen and Wonder Electricals 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 Wonder Electricals 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 Wonder Electricals Limited, you can compare the effects of market volatilities on Apex Frozen and Wonder Electricals 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 Wonder Electricals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Apex Frozen and Wonder Electricals.

Diversification Opportunities for Apex Frozen and Wonder Electricals

-0.56

Correlation Coefficient

Apex Frozen  Wonder Electricals

Excellent diversification

The 3 months correlation between Apex and Wonder is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding Apex Frozen Foods and Wonder Electricals Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wonder Electricals 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 Wonder Electricals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wonder Electricals has no effect on the direction of Apex Frozen i.e., Apex Frozen and Wonder Electricals go up and down completely randomly.

Pair Corralation between Apex Frozen and Wonder Electricals

Assuming the 90 days trading horizon Apex Frozen is expected to generate 13.36 times less return on investment than Wonder Electricals. But when comparing it to its historical volatility, Apex Frozen Foods is 1.02 times less risky than Wonder Electricals. It trades about 0.01 of its potential returns per unit of risk. Wonder Electricals Limited is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  15,729  in Wonder Electricals Limited on December 21, 2024 and sell it today you would earn a total of  1,752  from holding Wonder Electricals Limited or generate 11.14% return on investment over 90 days.

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

Apex Frozen Foods  vs.  Wonder Electricals Limited

Apex Frozen Foods

Risk-Adjusted Performance

Very Weak

Over the last 90 days Apex Frozen Foods has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Apex Frozen is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Wonder Electricals

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Wonder Electricals Limited are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather inconsistent technical and fundamental indicators, Wonder Electricals exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Apex Frozen and Wonder Electricals

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

The idea behind Apex Frozen Foods and Wonder Electricals 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.

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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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .