Correlation Between Foods Inns and VIP Clothing

Can any of the company-specific risk be diversified away by investing in both Foods Inns and VIP Clothing 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 VIP Clothing 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 VIP Clothing Limited, you can compare the effects of market volatilities on Foods Inns and VIP Clothing 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 VIP Clothing. Check out your portfolio center. Please also check ongoing floating volatility patterns of Foods Inns and VIP Clothing.

Diversification Opportunities for Foods Inns and VIP Clothing

-0.07

Correlation Coefficient

Foods Inns  VIP Clothing

Good diversification

The 3 months correlation between Foods and VIP is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding Foods Inns Limited and VIP Clothing Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VIP Clothing Limited 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 VIP Clothing. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VIP Clothing Limited has no effect on the direction of Foods Inns i.e., Foods Inns and VIP Clothing go up and down completely randomly.

Pair Corralation between Foods Inns and VIP Clothing

Assuming the 90 days trading horizon Foods Inns is expected to generate 15.44 times less return on investment than VIP Clothing. In addition to that, Foods Inns is 1.08 times more volatile than VIP Clothing Limited. It trades about 0.0 of its total potential returns per unit of risk. VIP Clothing Limited is currently generating about 0.01 per unit of volatility. If you would invest  4,280  in VIP Clothing Limited on October 24, 2024 and sell it today you would lose (3.00) from holding VIP Clothing Limited or give up 0.07% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.59%
Values	Daily Returns

Foods Inns Limited  vs.  VIP Clothing Limited

Foods Inns Limited

Risk-Adjusted Performance

0 of 100

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 latest weak performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

VIP Clothing Limited

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in VIP Clothing Limited are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain technical indicators, VIP Clothing may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Foods Inns and VIP Clothing

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

The idea behind Foods Inns Limited and VIP Clothing Limited 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.