Correlation Between Edita Food and Marks

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

Diversification Opportunities for Edita Food and Marks

-0.09

Correlation Coefficient

Edita Food  Marks

Good diversification

The 3 months correlation between Edita and Marks is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding Edita Food Industries and Marks and Spencer in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Marks and Spencer 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 Marks. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Marks and Spencer has no effect on the direction of Edita Food i.e., Edita Food and Marks go up and down completely randomly.

Pair Corralation between Edita Food and Marks

Assuming the 90 days trading horizon Edita Food Industries is expected to generate 1.0 times more return on investment than Marks. However, Edita Food Industries is 1.0 times less risky than Marks. It trades about 0.0 of its potential returns per unit of risk. Marks and Spencer is currently generating about -0.06 per unit of risk. If you would invest  200.00  in Edita Food Industries on December 23, 2024 and sell it today you would lose (1.00) from holding Edita Food Industries or give up 0.5% of portfolio value over 90 days.

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

Edita Food Industries  vs.  Marks and Spencer

Edita Food Industries

Risk-Adjusted Performance

Very Weak

Over the last 90 days Edita Food Industries has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Edita Food is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Marks and Spencer

Risk-Adjusted Performance

Very Weak

Over the last 90 days Marks and Spencer has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Edita Food and Marks

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

The idea behind Edita Food Industries and Marks and Spencer 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.