Correlation Between Edita Food and Contact Financial

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

By analyzing existing cross correlation between Edita Food Industries and Contact Financial Holding, you can compare the effects of market volatilities on Edita Food and Contact Financial 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 Edita Food with a short position of Contact Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Edita Food and Contact Financial.

Diversification Opportunities for Edita Food and Contact Financial

0.11

Correlation Coefficient

Edita Food  Contact Financial

Average diversification

The 3 months correlation between Edita and Contact is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding Edita Food Industries and Contact Financial Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Contact Financial Holding and Edita 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 Edita Food Industries are associated (or correlated) with Contact Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Contact Financial Holding has no effect on the direction of Edita Food i.e., Edita Food and Contact Financial go up and down completely randomly.

Pair Corralation between Edita Food and Contact Financial

Assuming the 90 days trading horizon Edita Food Industries is expected to generate 0.82 times more return on investment than Contact Financial. However, Edita Food Industries is 1.22 times less risky than Contact Financial. It trades about 0.08 of its potential returns per unit of risk. Contact Financial Holding is currently generating about 0.03 per unit of risk. If you would invest  1,345  in Edita Food Industries on October 11, 2024 and sell it today you would earn a total of  1,456  from holding Edita Food Industries or generate 108.25% return on investment over 90 days.

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

Edita Food Industries  vs.  Contact Financial Holding

Edita Food Industries

Risk-Adjusted Performance

1 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Edita Food Industries are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable technical and fundamental indicators, Edita Food is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Contact Financial Holding

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Contact Financial Holding are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile technical and fundamental indicators, Contact Financial may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Edita Food and Contact Financial

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

The idea behind Edita Food Industries and Contact Financial Holding 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 Commodity Directory module to find actively traded commodities issued by global exchanges.