Correlation Between FitLife Brands, and Davis Commodities

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

By analyzing existing cross correlation between FitLife Brands, Common and Davis Commodities Limited, you can compare the effects of market volatilities on FitLife Brands, and Davis Commodities 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 FitLife Brands, with a short position of Davis Commodities. Check out your portfolio center. Please also check ongoing floating volatility patterns of FitLife Brands, and Davis Commodities.

Diversification Opportunities for FitLife Brands, and Davis Commodities

0.13

Correlation Coefficient

FitLife Brands,  Davis Commodities

Average diversification

The 3 months correlation between FitLife and Davis is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding FitLife Brands, Common and Davis Commodities Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Davis Commodities and FitLife Brands, 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 FitLife Brands, Common are associated (or correlated) with Davis Commodities. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Davis Commodities has no effect on the direction of FitLife Brands, i.e., FitLife Brands, and Davis Commodities go up and down completely randomly.

Pair Corralation between FitLife Brands, and Davis Commodities

Given the investment horizon of 90 days FitLife Brands, Common is expected to under-perform the Davis Commodities. But the stock apears to be less risky and, when comparing its historical volatility, FitLife Brands, Common is 1.37 times less risky than Davis Commodities. The stock trades about -0.05 of its potential returns per unit of risk. The Davis Commodities Limited is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  97.00  in Davis Commodities Limited on December 4, 2024 and sell it today you would lose (1.01) from holding Davis Commodities Limited or give up 1.04% of portfolio value over 90 days.

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

FitLife Brands, Common  vs.  Davis Commodities Limited

FitLife Brands, Common

Risk-Adjusted Performance

Very Weak

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

Davis Commodities

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Davis Commodities Limited are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite quite uncertain fundamental indicators, Davis Commodities disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with FitLife Brands, and Davis Commodities

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

The idea behind FitLife Brands, Common and Davis Commodities 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.

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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.