Correlation Between Cult Food and Branded Legacy

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

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

Diversification Opportunities for Cult Food and Branded Legacy

-0.15

Correlation Coefficient

Cult Food  Branded Legacy

Good diversification

The 3 months correlation between Cult and Branded is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding Cult Food Science and Branded Legacy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Branded Legacy and Cult Food 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 Cult Food Science are associated (or correlated) with Branded Legacy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Branded Legacy has no effect on the direction of Cult Food i.e., Cult Food and Branded Legacy go up and down completely randomly.

Pair Corralation between Cult Food and Branded Legacy

Assuming the 90 days horizon Cult Food Science is expected to under-perform the Branded Legacy. But the otc stock apears to be less risky and, when comparing its historical volatility, Cult Food Science is 1.95 times less risky than Branded Legacy. The otc stock trades about -0.05 of its potential returns per unit of risk. The Branded Legacy is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  0.05  in Branded Legacy on December 20, 2024 and sell it today you would earn a total of  0.02  from holding Branded Legacy or generate 40.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	96.72%
Values	Daily Returns

Cult Food Science  vs.  Branded Legacy

Cult Food Science

Risk-Adjusted Performance

Very Weak

Over the last 90 days Cult Food Science has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Branded Legacy

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Branded Legacy are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak technical and fundamental indicators, Branded Legacy reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Cult Food and Branded Legacy

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

The idea behind Cult Food Science and Branded Legacy 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.