Correlation Between Edita Food and Speed Medical

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

Diversification Opportunities for Edita Food and Speed Medical

-0.19

Correlation Coefficient

Edita Food  Speed Medical

Good diversification

The 3 months correlation between Edita and Speed is -0.19. Overlapping area represents the amount of risk that can be diversified away by holding Edita Food Industries and Speed Medical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Speed Medical 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 Speed Medical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Speed Medical has no effect on the direction of Edita Food i.e., Edita Food and Speed Medical go up and down completely randomly.

Pair Corralation between Edita Food and Speed Medical

Assuming the 90 days trading horizon Edita Food Industries is expected to generate 1.28 times more return on investment than Speed Medical. However, Edita Food is 1.28 times more volatile than Speed Medical. It trades about 0.03 of its potential returns per unit of risk. Speed Medical is currently generating about 0.03 per unit of risk. If you would invest  2,803  in Edita Food Industries on September 16, 2024 and sell it today you would earn a total of  87.00  from holding Edita Food Industries or generate 3.1% 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.  Speed Medical

Edita Food Industries

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Edita Food Industries are ranked lower than 2 (%) 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.

Speed Medical

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Speed Medical are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable technical and fundamental indicators, Speed Medical is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Edita Food and Speed Medical

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

The idea behind Edita Food Industries and Speed Medical 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.