Correlation Between Whole Earth and Real Good

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

By analyzing existing cross correlation between Whole Earth Brands and Real Good Food, you can compare the effects of market volatilities on Whole Earth and Real Good 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 Whole Earth with a short position of Real Good. Check out your portfolio center. Please also check ongoing floating volatility patterns of Whole Earth and Real Good.

Diversification Opportunities for Whole Earth and Real Good

-0.52

Correlation Coefficient

Whole Earth  Real Good

Excellent diversification

The 3 months correlation between Whole and Real is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding Whole Earth Brands and Real Good Food in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Real Good Food and Whole Earth 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 Whole Earth Brands are associated (or correlated) with Real Good. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Real Good Food has no effect on the direction of Whole Earth i.e., Whole Earth and Real Good go up and down completely randomly.

Pair Corralation between Whole Earth and Real Good

Given the investment horizon of 90 days Whole Earth Brands is expected to under-perform the Real Good. But the stock apears to be less risky and, when comparing its historical volatility, Whole Earth Brands is 8.21 times less risky than Real Good. The stock trades about -0.01 of its potential returns per unit of risk. The Real Good Food is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  5,004  in Real Good Food on October 23, 2024 and sell it today you would lose (4,990) from holding Real Good Food or give up 99.72% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	76.43%
Values	Daily Returns

Whole Earth Brands  vs.  Real Good Food

Whole Earth Brands

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Whole Earth Brands has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Whole Earth is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Real Good Food

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Real Good Food are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak technical and fundamental indicators, Real Good reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Whole Earth and Real Good

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

The idea behind Whole Earth Brands and Real Good Food 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.