Correlation Between Food Moments and DTC Industries

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

By analyzing existing cross correlation between Food Moments PCL and DTC Industries Public, you can compare the effects of market volatilities on Food Moments and DTC Industries 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 Food Moments with a short position of DTC Industries. Check out your portfolio center. Please also check ongoing floating volatility patterns of Food Moments and DTC Industries.

Diversification Opportunities for Food Moments and DTC Industries

-0.04

Correlation Coefficient

Food Moments  DTC Industries

Good diversification

The 3 months correlation between Food and DTC is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding Food Moments PCL and DTC Industries Public in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DTC Industries Public and Food Moments 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 Food Moments PCL are associated (or correlated) with DTC Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DTC Industries Public has no effect on the direction of Food Moments i.e., Food Moments and DTC Industries go up and down completely randomly.

Pair Corralation between Food Moments and DTC Industries

Assuming the 90 days horizon Food Moments PCL is expected to generate 0.29 times more return on investment than DTC Industries. However, Food Moments PCL is 3.49 times less risky than DTC Industries. It trades about 0.09 of its potential returns per unit of risk. DTC Industries Public is currently generating about 0.01 per unit of risk. If you would invest  342.00  in Food Moments PCL on December 27, 2024 and sell it today you would earn a total of  48.00  from holding Food Moments PCL or generate 14.04% return on investment over 90 days.

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

Food Moments PCL  vs.  DTC Industries Public

Food Moments PCL

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Food Moments PCL are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting fundamental drivers, Food Moments disclosed solid returns over the last few months and may actually be approaching a breakup point.

DTC Industries Public

Risk-Adjusted Performance

Very Weak

Over the last 90 days DTC Industries Public has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite conflicting forward-looking signals, DTC Industries may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Food Moments and DTC Industries

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

The idea behind Food Moments PCL and DTC Industries Public 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.