Correlation Between Cambridge Technology and Foods Inns

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

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

Diversification Opportunities for Cambridge Technology and Foods Inns

0.92

Correlation Coefficient

Cambridge Technology  Foods Inns

Almost no diversification

The 3 months correlation between Cambridge and Foods is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Cambridge Technology Enterpris and Foods Inns Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Foods Inns Limited and Cambridge Technology 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 Cambridge Technology Enterprises are associated (or correlated) with Foods Inns. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Foods Inns Limited has no effect on the direction of Cambridge Technology i.e., Cambridge Technology and Foods Inns go up and down completely randomly.

Pair Corralation between Cambridge Technology and Foods Inns

Assuming the 90 days trading horizon Cambridge Technology Enterprises is expected to under-perform the Foods Inns. But the stock apears to be less risky and, when comparing its historical volatility, Cambridge Technology Enterprises is 1.09 times less risky than Foods Inns. The stock trades about -0.38 of its potential returns per unit of risk. The Foods Inns Limited is currently generating about -0.11 of returns per unit of risk over similar time horizon. If you would invest  11,606  in Foods Inns Limited on December 25, 2024 and sell it today you would lose (3,230) from holding Foods Inns Limited or give up 27.83% of portfolio value over 90 days.

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

Cambridge Technology Enterpris  vs.  Foods Inns Limited

Cambridge Technology

Risk-Adjusted Performance

Very Weak

Over the last 90 days Cambridge Technology Enterprises has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Foods Inns Limited

Risk-Adjusted Performance

Very Weak

Over the last 90 days Foods Inns Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of inconsistent performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in April 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Cambridge Technology and Foods Inns

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

The idea behind Cambridge Technology Enterprises and Foods Inns Limited 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.