Correlation Between Four Leaf and Marine Products

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

By analyzing existing cross correlation between Four Leaf Acquisition and Marine Products, you can compare the effects of market volatilities on Four Leaf and Marine Products 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 Four Leaf with a short position of Marine Products. Check out your portfolio center. Please also check ongoing floating volatility patterns of Four Leaf and Marine Products.

Diversification Opportunities for Four Leaf and Marine Products

-0.31

Correlation Coefficient

Four Leaf  Marine Products

Very good diversification

The 3 months correlation between Four and Marine is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding Four Leaf Acquisition and Marine Products in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Marine Products and Four Leaf 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 Four Leaf Acquisition are associated (or correlated) with Marine Products. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Marine Products has no effect on the direction of Four Leaf i.e., Four Leaf and Marine Products go up and down completely randomly.

Pair Corralation between Four Leaf and Marine Products

Given the investment horizon of 90 days Four Leaf Acquisition is expected to generate 0.12 times more return on investment than Marine Products. However, Four Leaf Acquisition is 8.13 times less risky than Marine Products. It trades about 0.14 of its potential returns per unit of risk. Marine Products is currently generating about -0.03 per unit of risk. If you would invest  1,101  in Four Leaf Acquisition on October 25, 2024 and sell it today you would earn a total of  19.00  from holding Four Leaf Acquisition or generate 1.73% return on investment over 90 days.

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

Four Leaf Acquisition  vs.  Marine Products

Four Leaf Acquisition

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Four Leaf Acquisition are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent basic indicators, Four Leaf is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Marine Products

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Marine Products has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Marine Products is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Four Leaf and Marine Products

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

The idea behind Four Leaf Acquisition and Marine Products 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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.