Correlation Between Firstrand and Quantum Foods

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

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

Diversification Opportunities for Firstrand and Quantum Foods

0.69

Correlation Coefficient

Firstrand  Quantum Foods

Poor diversification

The 3 months correlation between Firstrand and Quantum is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Firstrand and Quantum Foods Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Quantum Foods Holdings and Firstrand 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 Firstrand are associated (or correlated) with Quantum Foods. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Quantum Foods Holdings has no effect on the direction of Firstrand i.e., Firstrand and Quantum Foods go up and down completely randomly.

Pair Corralation between Firstrand and Quantum Foods

Assuming the 90 days trading horizon Firstrand is expected to generate 0.19 times more return on investment than Quantum Foods. However, Firstrand is 5.39 times less risky than Quantum Foods. It trades about -0.08 of its potential returns per unit of risk. Quantum Foods Holdings is currently generating about -0.1 per unit of risk. If you would invest  817,700  in Firstrand on October 23, 2024 and sell it today you would lose (53,200) from holding Firstrand or give up 6.51% of portfolio value over 90 days.

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

Firstrand  vs.  Quantum Foods Holdings

Firstrand

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Firstrand has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Quantum Foods Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Firstrand and Quantum Foods

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

The idea behind Firstrand and Quantum Foods Holdings 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.