Correlation Between Granprade and Famous Brands

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

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

Diversification Opportunities for Granprade and Famous Brands

-0.62

Correlation Coefficient

Granprade  Famous Brands

Excellent diversification

The 3 months correlation between Granprade and Famous is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding Granprade and Famous Brands in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Famous Brands and Granprade 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 Granprade are associated (or correlated) with Famous Brands. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Famous Brands has no effect on the direction of Granprade i.e., Granprade and Famous Brands go up and down completely randomly.

Pair Corralation between Granprade and Famous Brands

Assuming the 90 days trading horizon Granprade is expected to generate 14.1 times less return on investment than Famous Brands. In addition to that, Granprade is 1.31 times more volatile than Famous Brands. It trades about 0.01 of its total potential returns per unit of risk. Famous Brands is currently generating about 0.1 per unit of volatility. If you would invest  526,600  in Famous Brands on September 24, 2024 and sell it today you would earn a total of  170,400  from holding Famous Brands or generate 32.36% return on investment over 90 days.

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

Granprade  vs.  Famous Brands

Granprade

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Granprade 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.

Famous Brands

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Famous Brands are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, Famous Brands exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Granprade and Famous Brands

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

The idea behind Granprade and Famous Brands 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.