Correlation Between Ice Fish and Clean Seas

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

By analyzing existing cross correlation between Ice Fish Farm and Clean Seas Seafood, you can compare the effects of market volatilities on Ice Fish and Clean Seas 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 Ice Fish with a short position of Clean Seas. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ice Fish and Clean Seas.

Diversification Opportunities for Ice Fish and Clean Seas

-0.7

Correlation Coefficient

Ice Fish  Clean Seas

Excellent diversification

The 3 months correlation between Ice and Clean is -0.7. Overlapping area represents the amount of risk that can be diversified away by holding Ice Fish Farm and Clean Seas Seafood in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Clean Seas Seafood and Ice Fish 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 Ice Fish Farm are associated (or correlated) with Clean Seas. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Clean Seas Seafood has no effect on the direction of Ice Fish i.e., Ice Fish and Clean Seas go up and down completely randomly.

Pair Corralation between Ice Fish and Clean Seas

Assuming the 90 days trading horizon Ice Fish Farm is expected to generate 1.32 times more return on investment than Clean Seas. However, Ice Fish is 1.32 times more volatile than Clean Seas Seafood. It trades about 0.1 of its potential returns per unit of risk. Clean Seas Seafood is currently generating about -0.25 per unit of risk. If you would invest  2,400  in Ice Fish Farm on September 2, 2024 and sell it today you would earn a total of  700.00  from holding Ice Fish Farm or generate 29.17% return on investment over 90 days.

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

Ice Fish Farm  vs.  Clean Seas Seafood

Ice Fish Farm

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Ice Fish Farm are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Ice Fish displayed solid returns over the last few months and may actually be approaching a breakup point.

Clean Seas Seafood

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Clean Seas Seafood has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in January 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with Ice Fish and Clean Seas

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

The idea behind Ice Fish Farm and Clean Seas Seafood 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.