Correlation Between Burnham Holdings and Hanover Foods

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

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

Diversification Opportunities for Burnham Holdings and Hanover Foods

-0.03

Correlation Coefficient

Burnham Holdings  Hanover Foods

Good diversification

The 3 months correlation between Burnham and Hanover is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding Burnham Holdings and Hanover Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hanover Foods and Burnham Holdings 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 Burnham Holdings are associated (or correlated) with Hanover Foods. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hanover Foods has no effect on the direction of Burnham Holdings i.e., Burnham Holdings and Hanover Foods go up and down completely randomly.

Pair Corralation between Burnham Holdings and Hanover Foods

If you would invest  1,370  in Burnham Holdings on September 25, 2024 and sell it today you would earn a total of  30.00  from holding Burnham Holdings or generate 2.19% return on investment over 90 days.

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

Burnham Holdings  vs.  Hanover Foods

Burnham Holdings

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days Burnham Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong fundamental indicators, Burnham Holdings is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Hanover Foods

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hanover Foods has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Hanover Foods is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Burnham Holdings and Hanover Foods

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

The idea behind Burnham Holdings and Hanover 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..