Correlation Between RENUKA FOODS and Aitken Spence

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

By analyzing existing cross correlation between RENUKA FOODS PLC and Aitken Spence Hotel, you can compare the effects of market volatilities on RENUKA FOODS and Aitken Spence 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 RENUKA FOODS with a short position of Aitken Spence. Check out your portfolio center. Please also check ongoing floating volatility patterns of RENUKA FOODS and Aitken Spence.

Diversification Opportunities for RENUKA FOODS and Aitken Spence

0.07

Correlation Coefficient

RENUKA FOODS  Aitken Spence

Significant diversification

The 3 months correlation between RENUKA and Aitken is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding RENUKA FOODS PLC and Aitken Spence Hotel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aitken Spence Hotel and RENUKA 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 RENUKA FOODS PLC are associated (or correlated) with Aitken Spence. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aitken Spence Hotel has no effect on the direction of RENUKA FOODS i.e., RENUKA FOODS and Aitken Spence go up and down completely randomly.

Pair Corralation between RENUKA FOODS and Aitken Spence

Assuming the 90 days trading horizon RENUKA FOODS is expected to generate 5.24 times less return on investment than Aitken Spence. But when comparing it to its historical volatility, RENUKA FOODS PLC is 1.11 times less risky than Aitken Spence. It trades about 0.05 of its potential returns per unit of risk. Aitken Spence Hotel is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest  5,740  in Aitken Spence Hotel on September 14, 2024 and sell it today you would earn a total of  1,700  from holding Aitken Spence Hotel or generate 29.62% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	94.92%
Values	Daily Returns

RENUKA FOODS PLC  vs.  Aitken Spence Hotel

RENUKA FOODS PLC

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in RENUKA FOODS PLC are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, RENUKA FOODS is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Aitken Spence Hotel

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Aitken Spence Hotel are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Aitken Spence sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with RENUKA FOODS and Aitken Spence

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

The idea behind RENUKA FOODS PLC and Aitken Spence Hotel 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.