Correlation Between Invest Capital and National Foods

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

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

Diversification Opportunities for Invest Capital and National Foods

0.53

Correlation Coefficient

Invest Capital  National Foods

Very weak diversification

The 3 months correlation between Invest and National is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Invest Capital Investment and National Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on National Foods and Invest Capital 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 Invest Capital Investment are associated (or correlated) with National Foods. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of National Foods has no effect on the direction of Invest Capital i.e., Invest Capital and National Foods go up and down completely randomly.

Pair Corralation between Invest Capital and National Foods

Assuming the 90 days trading horizon Invest Capital Investment is expected to under-perform the National Foods. In addition to that, Invest Capital is 2.45 times more volatile than National Foods. It trades about -0.1 of its total potential returns per unit of risk. National Foods is currently generating about 0.02 per unit of volatility. If you would invest  18,939  in National Foods on October 12, 2024 and sell it today you would earn a total of  62.00  from holding National Foods or generate 0.33% return on investment over 90 days.

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

Invest Capital Investment  vs.  National Foods

Invest Capital Investment

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Invest Capital Investment has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent forward indicators, Invest Capital is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

National Foods

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in National Foods are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, National Foods sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Invest Capital and National Foods

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

The idea behind Invest Capital Investment and National Foods 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 Transaction History module to view history of all your transactions and understand their impact on performance.