Correlation Between Foodlink and Interlife General

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

By analyzing existing cross correlation between Foodlink AE and Interlife General Insurance, you can compare the effects of market volatilities on Foodlink and Interlife General 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 Foodlink with a short position of Interlife General. Check out your portfolio center. Please also check ongoing floating volatility patterns of Foodlink and Interlife General.

Diversification Opportunities for Foodlink and Interlife General

0.66

Correlation Coefficient

Foodlink  Interlife General

Poor diversification

The 3 months correlation between Foodlink and Interlife is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Foodlink AE and Interlife General Insurance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Interlife General and Foodlink 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 Foodlink AE are associated (or correlated) with Interlife General. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Interlife General has no effect on the direction of Foodlink i.e., Foodlink and Interlife General go up and down completely randomly.

Pair Corralation between Foodlink and Interlife General

Assuming the 90 days trading horizon Foodlink is expected to generate 1.58 times less return on investment than Interlife General. In addition to that, Foodlink is 1.92 times more volatile than Interlife General Insurance. It trades about 0.08 of its total potential returns per unit of risk. Interlife General Insurance is currently generating about 0.24 per unit of volatility. If you would invest  454.00  in Interlife General Insurance on December 3, 2024 and sell it today you would earn a total of  37.00  from holding Interlife General Insurance or generate 8.15% return on investment over 90 days.

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

Foodlink AE  vs.  Interlife General Insurance

Foodlink AE

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Foodlink AE are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Foodlink sustained solid returns over the last few months and may actually be approaching a breakup point.

Interlife General

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Interlife General Insurance are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Interlife General sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Foodlink and Interlife General

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

The idea behind Foodlink AE and Interlife General Insurance 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.