Correlation Between Fresh Del and Advantest

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

By analyzing existing cross correlation between Fresh Del Monte and Advantest, you can compare the effects of market volatilities on Fresh Del and Advantest 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 Fresh Del with a short position of Advantest. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fresh Del and Advantest.

Diversification Opportunities for Fresh Del and Advantest

0.94

Correlation Coefficient

Fresh Del  Advantest

Almost no diversification

The 3 months correlation between Fresh and Advantest is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Fresh Del Monte and Advantest in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Advantest and Fresh Del 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 Fresh Del Monte are associated (or correlated) with Advantest. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Advantest has no effect on the direction of Fresh Del i.e., Fresh Del and Advantest go up and down completely randomly.

Pair Corralation between Fresh Del and Advantest

Considering the 90-day investment horizon Fresh Del is expected to generate 2.49 times less return on investment than Advantest. But when comparing it to its historical volatility, Fresh Del Monte is 1.68 times less risky than Advantest. It trades about 0.14 of its potential returns per unit of risk. Advantest is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest  4,347  in Advantest on September 18, 2024 and sell it today you would earn a total of  1,903  from holding Advantest or generate 43.78% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	98.41%
Values	Daily Returns

Fresh Del Monte  vs.  Advantest

Fresh Del Monte

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Fresh Del Monte are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak fundamental indicators, Fresh Del reported solid returns over the last few months and may actually be approaching a breakup point.

Advantest

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Advantest are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Advantest reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Fresh Del and Advantest

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

The idea behind Fresh Del Monte and Advantest 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.