Correlation Between Foods Inns and Biofil Chemicals

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

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

Diversification Opportunities for Foods Inns and Biofil Chemicals

0.85

Correlation Coefficient

Foods Inns  Biofil Chemicals

Very poor diversification

The 3 months correlation between Foods and Biofil is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Foods Inns Limited and Biofil Chemicals Pharmaceutica in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Biofil Chemicals Pha and Foods Inns 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 Foods Inns Limited are associated (or correlated) with Biofil Chemicals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Biofil Chemicals Pha has no effect on the direction of Foods Inns i.e., Foods Inns and Biofil Chemicals go up and down completely randomly.

Pair Corralation between Foods Inns and Biofil Chemicals

Assuming the 90 days trading horizon Foods Inns Limited is expected to under-perform the Biofil Chemicals. But the stock apears to be less risky and, when comparing its historical volatility, Foods Inns Limited is 1.21 times less risky than Biofil Chemicals. The stock trades about -0.05 of its potential returns per unit of risk. The Biofil Chemicals Pharmaceuticals is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  4,930  in Biofil Chemicals Pharmaceuticals on November 29, 2024 and sell it today you would earn a total of  67.00  from holding Biofil Chemicals Pharmaceuticals or generate 1.36% return on investment over 90 days.

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

Foods Inns Limited  vs.  Biofil Chemicals Pharmaceutica

Foods Inns Limited

Risk-Adjusted Performance

Very Weak

Over the last 90 days Foods Inns Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in March 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Biofil Chemicals Pha

Risk-Adjusted Performance

Very Weak

Over the last 90 days Biofil Chemicals Pharmaceuticals has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of conflicting performance in the last few months, the Stock's technical indicators remain rather sound which may send shares a bit higher in March 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Foods Inns and Biofil Chemicals

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

The idea behind Foods Inns Limited and Biofil Chemicals Pharmaceuticals 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.