Correlation Between Better Choice and Nichirei

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

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

Diversification Opportunities for Better Choice and Nichirei

0.0

Correlation Coefficient

Better Choice  Nichirei

Pay attention - limited upside

The 3 months correlation between Better and Nichirei is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Better Choice and Nichirei in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nichirei and Better Choice 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 Better Choice are associated (or correlated) with Nichirei. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nichirei has no effect on the direction of Better Choice i.e., Better Choice and Nichirei go up and down completely randomly.

Pair Corralation between Better Choice and Nichirei

Given the investment horizon of 90 days Better Choice is expected to under-perform the Nichirei. In addition to that, Better Choice is 8.61 times more volatile than Nichirei. It trades about -0.01 of its total potential returns per unit of risk. Nichirei is currently generating about 0.06 per unit of volatility. If you would invest  918.00  in Nichirei on October 3, 2024 and sell it today you would earn a total of  292.00  from holding Nichirei or generate 31.81% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	99.6%
Values	Daily Returns

Better Choice  vs.  Nichirei

Better Choice

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Better Choice are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Better Choice reported solid returns over the last few months and may actually be approaching a breakup point.

Nichirei

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Nichirei has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong technical and fundamental indicators, Nichirei is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Better Choice and Nichirei

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

The idea behind Better Choice and Nichirei 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.