Correlation Between Fairchem Organics and Apex Frozen

Can any of the company-specific risk be diversified away by investing in both Fairchem Organics and Apex Frozen 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 Fairchem Organics and Apex Frozen into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Fairchem Organics Limited and Apex Frozen Foods, you can compare the effects of market volatilities on Fairchem Organics and Apex Frozen 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 Fairchem Organics with a short position of Apex Frozen. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fairchem Organics and Apex Frozen.

Diversification Opportunities for Fairchem Organics and Apex Frozen

0.3

Correlation Coefficient

Fairchem Organics  Apex Frozen

Weak diversification

The 3 months correlation between Fairchem and Apex is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Fairchem Organics Limited and Apex Frozen Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Apex Frozen Foods and Fairchem Organics 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 Fairchem Organics Limited are associated (or correlated) with Apex Frozen. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Apex Frozen Foods has no effect on the direction of Fairchem Organics i.e., Fairchem Organics and Apex Frozen go up and down completely randomly.

Pair Corralation between Fairchem Organics and Apex Frozen

Assuming the 90 days trading horizon Fairchem Organics Limited is expected to generate 2.26 times more return on investment than Apex Frozen. However, Fairchem Organics is 2.26 times more volatile than Apex Frozen Foods. It trades about 0.27 of its potential returns per unit of risk. Apex Frozen Foods is currently generating about 0.15 per unit of risk. If you would invest  82,575  in Fairchem Organics Limited on September 20, 2024 and sell it today you would earn a total of  33,835  from holding Fairchem Organics Limited or generate 40.97% return on investment over 90 days.

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

Fairchem Organics Limited  vs.  Apex Frozen Foods

Fairchem Organics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Fairchem Organics Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound primary indicators, Fairchem Organics is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Apex Frozen Foods

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Apex Frozen Foods are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively inconsistent basic indicators, Apex Frozen may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Fairchem Organics and Apex Frozen

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

The idea behind Fairchem Organics Limited and Apex Frozen Foods 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.