Correlation Between Innovative Food and Chefs Warehouse

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

By analyzing existing cross correlation between Innovative Food Hldg and The Chefs Warehouse, you can compare the effects of market volatilities on Innovative Food and Chefs Warehouse 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 Innovative Food with a short position of Chefs Warehouse. Check out your portfolio center. Please also check ongoing floating volatility patterns of Innovative Food and Chefs Warehouse.

Diversification Opportunities for Innovative Food and Chefs Warehouse

0.71

Correlation Coefficient

Innovative Food  Chefs Warehouse

Poor diversification

The 3 months correlation between Innovative and Chefs is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Innovative Food Hldg and The Chefs Warehouse in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chefs Warehouse and Innovative Food 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 Innovative Food Hldg are associated (or correlated) with Chefs Warehouse. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chefs Warehouse has no effect on the direction of Innovative Food i.e., Innovative Food and Chefs Warehouse go up and down completely randomly.

Pair Corralation between Innovative Food and Chefs Warehouse

Given the investment horizon of 90 days Innovative Food is expected to generate 1.72 times less return on investment than Chefs Warehouse. In addition to that, Innovative Food is 1.15 times more volatile than The Chefs Warehouse. It trades about 0.04 of its total potential returns per unit of risk. The Chefs Warehouse is currently generating about 0.07 per unit of volatility. If you would invest  4,900  in The Chefs Warehouse on December 29, 2024 and sell it today you would earn a total of  447.00  from holding The Chefs Warehouse or generate 9.12% return on investment over 90 days.

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

Innovative Food Hldg  vs.  The Chefs Warehouse

Innovative Food Hldg

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Innovative Food Hldg are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong technical and fundamental indicators, Innovative Food is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

Chefs Warehouse

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in The Chefs Warehouse are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady technical and fundamental indicators, Chefs Warehouse may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Innovative Food and Chefs Warehouse

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

The idea behind Innovative Food Hldg and The Chefs Warehouse 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.