Correlation Between Autosports Group and Pure Foods

Can any of the company-specific risk be diversified away by investing in both Autosports Group and Pure 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 Autosports Group and Pure Foods into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Autosports Group and Pure Foods Tasmania, you can compare the effects of market volatilities on Autosports Group and Pure 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 Autosports Group with a short position of Pure Foods. Check out your portfolio center. Please also check ongoing floating volatility patterns of Autosports Group and Pure Foods.

Diversification Opportunities for Autosports Group and Pure Foods

0.46

Correlation Coefficient

Autosports Group  Pure Foods

Very weak diversification

The 3 months correlation between Autosports and Pure is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Autosports Group and Pure Foods Tasmania in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pure Foods Tasmania and Autosports Group 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 Autosports Group are associated (or correlated) with Pure Foods. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pure Foods Tasmania has no effect on the direction of Autosports Group i.e., Autosports Group and Pure Foods go up and down completely randomly.

Pair Corralation between Autosports Group and Pure Foods

Assuming the 90 days trading horizon Autosports Group is expected to generate 8.52 times less return on investment than Pure Foods. But when comparing it to its historical volatility, Autosports Group is 4.66 times less risky than Pure Foods. It trades about 0.04 of its potential returns per unit of risk. Pure Foods Tasmania is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  2.10  in Pure Foods Tasmania on December 22, 2024 and sell it today you would earn a total of  0.40  from holding Pure Foods Tasmania or generate 19.05% return on investment over 90 days.

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

Autosports Group  vs.  Pure Foods Tasmania

Autosports Group

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Autosports Group are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable technical and fundamental indicators, Autosports Group is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pure Foods Tasmania

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Pure Foods Tasmania are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Pure Foods unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Autosports Group and Pure Foods

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

The idea behind Autosports Group and Pure Foods Tasmania 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.