Correlation Between Collins Foods and Strickland Metals

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

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

Diversification Opportunities for Collins Foods and Strickland Metals

-0.4

Correlation Coefficient

Collins Foods  Strickland Metals

Very good diversification

The 3 months correlation between Collins and Strickland is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding Collins Foods and Strickland Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Strickland Metals and Collins Foods 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 Collins Foods are associated (or correlated) with Strickland Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Strickland Metals has no effect on the direction of Collins Foods i.e., Collins Foods and Strickland Metals go up and down completely randomly.

Pair Corralation between Collins Foods and Strickland Metals

Assuming the 90 days trading horizon Collins Foods is expected to under-perform the Strickland Metals. But the stock apears to be less risky and, when comparing its historical volatility, Collins Foods is 3.65 times less risky than Strickland Metals. The stock trades about -0.16 of its potential returns per unit of risk. The Strickland Metals is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  8.40  in Strickland Metals on October 8, 2024 and sell it today you would earn a total of  0.00  from holding Strickland Metals or generate 0.0% return on investment over 90 days.

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

Collins Foods  vs.  Strickland Metals

Collins Foods

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Collins Foods has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's technical and fundamental indicators remain comparatively stable which may send shares a bit higher in February 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Strickland Metals

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Strickland Metals are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain forward-looking signals, Strickland Metals may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Collins Foods and Strickland Metals

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

The idea behind Collins Foods and Strickland Metals 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.