Correlation Between JD Food and Nova Organic

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

By analyzing existing cross correlation between JD Food PCL and Nova Organic PCL, you can compare the effects of market volatilities on JD Food and Nova Organic 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 JD Food with a short position of Nova Organic. Check out your portfolio center. Please also check ongoing floating volatility patterns of JD Food and Nova Organic.

Diversification Opportunities for JD Food and Nova Organic

0.08

Correlation Coefficient

JD Food  Nova Organic

Significant diversification

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

Pair Corralation between JD Food and Nova Organic

Assuming the 90 days trading horizon JD Food PCL is expected to under-perform the Nova Organic. But the stock apears to be less risky and, when comparing its historical volatility, JD Food PCL is 4.27 times less risky than Nova Organic. The stock trades about -0.03 of its potential returns per unit of risk. The Nova Organic PCL is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  83.00  in Nova Organic PCL on December 27, 2024 and sell it today you would lose (3.00) from holding Nova Organic PCL or give up 3.61% of portfolio value over 90 days.

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

JD Food PCL  vs.  Nova Organic PCL

JD Food PCL

Risk-Adjusted Performance

Very Weak

Over the last 90 days JD Food PCL has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent technical and fundamental indicators, JD Food is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

Nova Organic PCL

Risk-Adjusted Performance

Insignificant

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

Pair Trading with JD Food and Nova Organic

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

The idea behind JD Food PCL and Nova Organic PCL 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.