Correlation Between Hanover Foods and Pardee Resources

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

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

Diversification Opportunities for Hanover Foods and Pardee Resources

0.08

Correlation Coefficient

Hanover Foods  Pardee Resources

Significant diversification

The 3 months correlation between Hanover and Pardee is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Hanover Foods and Pardee Resources Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pardee Resources and Hanover Foods 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 Hanover Foods are associated (or correlated) with Pardee Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pardee Resources has no effect on the direction of Hanover Foods i.e., Hanover Foods and Pardee Resources go up and down completely randomly.

Pair Corralation between Hanover Foods and Pardee Resources

Assuming the 90 days horizon Hanover Foods is expected to generate 37.05 times less return on investment than Pardee Resources. But when comparing it to its historical volatility, Hanover Foods is 2.65 times less risky than Pardee Resources. It trades about 0.01 of its potential returns per unit of risk. Pardee Resources Co is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  27,993  in Pardee Resources Co on September 25, 2024 and sell it today you would earn a total of  4,585  from holding Pardee Resources Co or generate 16.38% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

Hanover Foods  vs.  Pardee Resources Co

Hanover Foods

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hanover Foods has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Hanover Foods is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pardee Resources

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Pardee Resources Co are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Even with relatively unfluctuating technical and fundamental indicators, Pardee Resources reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Hanover Foods and Pardee Resources

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

The idea behind Hanover Foods and Pardee Resources Co 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.