Correlation Between Innovative Food and MDJH Old

Can any of the company-specific risk be diversified away by investing in both Innovative Food and MDJH Old 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 MDJH Old 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 MDJH Old, you can compare the effects of market volatilities on Innovative Food and MDJH Old 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 MDJH Old. Check out your portfolio center. Please also check ongoing floating volatility patterns of Innovative Food and MDJH Old.

Diversification Opportunities for Innovative Food and MDJH Old

-0.24

Correlation Coefficient

Innovative Food  MDJH Old

Very good diversification

The 3 months correlation between Innovative and MDJH is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding Innovative Food Hldg and MDJH Old in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MDJH Old 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 MDJH Old. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MDJH Old has no effect on the direction of Innovative Food i.e., Innovative Food and MDJH Old go up and down completely randomly.

Pair Corralation between Innovative Food and MDJH Old

Given the investment horizon of 90 days Innovative Food is expected to generate 21.96 times less return on investment than MDJH Old. But when comparing it to its historical volatility, Innovative Food Hldg is 7.44 times less risky than MDJH Old. It trades about 0.04 of its potential returns per unit of risk. MDJH Old is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  20.00  in MDJH Old on December 29, 2024 and sell it today you would earn a total of  4.00  from holding MDJH Old or generate 20.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	39.34%
Values	Daily Returns

Innovative Food Hldg  vs.  MDJH Old

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.

MDJH Old

Risk-Adjusted Performance

OK

Over the last 90 days MDJH Old has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly unfluctuating forward-looking indicators, MDJH Old demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Innovative Food and MDJH Old

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

The idea behind Innovative Food Hldg and MDJH Old 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.