Correlation Between Discount Investment and Millennium Food

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

By analyzing existing cross correlation between Discount Investment Corp and Millennium Food Tech LP, you can compare the effects of market volatilities on Discount Investment and Millennium Food 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 Discount Investment with a short position of Millennium Food. Check out your portfolio center. Please also check ongoing floating volatility patterns of Discount Investment and Millennium Food.

Diversification Opportunities for Discount Investment and Millennium Food

-0.21

Correlation Coefficient

Discount Investment  Millennium Food

Very good diversification

The 3 months correlation between Discount and Millennium is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding Discount Investment Corp and Millennium Food Tech LP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Millennium Food Tech and Discount Investment 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 Discount Investment Corp are associated (or correlated) with Millennium Food. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Millennium Food Tech has no effect on the direction of Discount Investment i.e., Discount Investment and Millennium Food go up and down completely randomly.

Pair Corralation between Discount Investment and Millennium Food

Assuming the 90 days trading horizon Discount Investment Corp is expected to generate 0.76 times more return on investment than Millennium Food. However, Discount Investment Corp is 1.31 times less risky than Millennium Food. It trades about 0.07 of its potential returns per unit of risk. Millennium Food Tech LP is currently generating about -0.01 per unit of risk. If you would invest  39,450  in Discount Investment Corp on October 26, 2024 and sell it today you would earn a total of  3,100  from holding Discount Investment Corp or generate 7.86% return on investment over 90 days.

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

Discount Investment Corp  vs.  Millennium Food Tech LP

Discount Investment Corp

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Discount Investment Corp are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Discount Investment may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Millennium Food Tech

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Discount Investment and Millennium Food

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

The idea behind Discount Investment Corp and Millennium Food Tech LP 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.