Correlation Between Edita Food and Grand Investment

Can any of the company-specific risk be diversified away by investing in both Edita Food and Grand Investment 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 Grand Investment 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 Grand Investment Capital, you can compare the effects of market volatilities on Edita Food and Grand Investment 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 Grand Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of Edita Food and Grand Investment.

Diversification Opportunities for Edita Food and Grand Investment

-0.39

Correlation Coefficient

Edita Food  Grand Investment

Very good diversification

The 3 months correlation between Edita and Grand is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding Edita Food Industries and Grand Investment Capital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Grand Investment Capital 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 Grand Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Grand Investment Capital has no effect on the direction of Edita Food i.e., Edita Food and Grand Investment go up and down completely randomly.

Pair Corralation between Edita Food and Grand Investment

Assuming the 90 days trading horizon Edita Food Industries is expected to under-perform the Grand Investment. But the stock apears to be less risky and, when comparing its historical volatility, Edita Food Industries is 1.35 times less risky than Grand Investment. The stock trades about -0.08 of its potential returns per unit of risk. The Grand Investment Capital is currently generating about 0.36 of returns per unit of risk over similar time horizon. If you would invest  912.00  in Grand Investment Capital on October 7, 2024 and sell it today you would earn a total of  135.00  from holding Grand Investment Capital or generate 14.8% return on investment over 90 days.

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

Edita Food Industries  vs.  Grand Investment Capital

Edita Food Industries

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Edita Food Industries has generated negative risk-adjusted returns adding no value to investors with long positions. 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.

Grand Investment Capital

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Grand Investment Capital are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile technical and fundamental indicators, Grand Investment reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Edita Food and Grand Investment

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

The idea behind Edita Food Industries and Grand Investment Capital 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.