Correlation Between Franchise and Pet Acquisition

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

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

Diversification Opportunities for Franchise and Pet Acquisition

-0.26

Correlation Coefficient

Franchise  Pet Acquisition

Very good diversification

The 3 months correlation between Franchise and Pet is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding Franchise Group and Pet Acquisition LLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pet Acquisition LLC and Franchise 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 Franchise Group are associated (or correlated) with Pet Acquisition. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pet Acquisition LLC has no effect on the direction of Franchise i.e., Franchise and Pet Acquisition go up and down completely randomly.

Pair Corralation between Franchise and Pet Acquisition

If you would invest  337.00  in Pet Acquisition LLC on September 29, 2024 and sell it today you would earn a total of  73.00  from holding Pet Acquisition LLC or generate 21.66% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	0.79%
Values	Daily Returns

Franchise Group  vs.  Pet Acquisition LLC

Franchise Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Franchise Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Franchise is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pet Acquisition LLC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Pet Acquisition LLC has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Pet Acquisition is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Franchise and Pet Acquisition

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

The idea behind Franchise Group and Pet Acquisition LLC 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.