Correlation Between RETAIL FOOD and OPERA SOFTWARE

Can any of the company-specific risk be diversified away by investing in both RETAIL FOOD and OPERA SOFTWARE 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 RETAIL FOOD and OPERA SOFTWARE into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between RETAIL FOOD GROUP and OPERA SOFTWARE, you can compare the effects of market volatilities on RETAIL FOOD and OPERA SOFTWARE 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 RETAIL FOOD with a short position of OPERA SOFTWARE. Check out your portfolio center. Please also check ongoing floating volatility patterns of RETAIL FOOD and OPERA SOFTWARE.

Diversification Opportunities for RETAIL FOOD and OPERA SOFTWARE

0.27

Correlation Coefficient

RETAIL FOOD  OPERA SOFTWARE

Modest diversification

The 3 months correlation between RETAIL and OPERA is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding RETAIL FOOD GROUP and OPERA SOFTWARE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on OPERA SOFTWARE and RETAIL 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 RETAIL FOOD GROUP are associated (or correlated) with OPERA SOFTWARE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of OPERA SOFTWARE has no effect on the direction of RETAIL FOOD i.e., RETAIL FOOD and OPERA SOFTWARE go up and down completely randomly.

Pair Corralation between RETAIL FOOD and OPERA SOFTWARE

Assuming the 90 days trading horizon RETAIL FOOD GROUP is expected to under-perform the OPERA SOFTWARE. In addition to that, RETAIL FOOD is 1.55 times more volatile than OPERA SOFTWARE. It trades about -0.04 of its total potential returns per unit of risk. OPERA SOFTWARE is currently generating about -0.01 per unit of volatility. If you would invest  65.00  in OPERA SOFTWARE on October 9, 2024 and sell it today you would lose (1.00) from holding OPERA SOFTWARE or give up 1.54% of portfolio value over 90 days.

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

RETAIL FOOD GROUP  vs.  OPERA SOFTWARE

RETAIL FOOD GROUP

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days RETAIL FOOD GROUP has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, RETAIL FOOD is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

OPERA SOFTWARE

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days OPERA SOFTWARE has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, OPERA SOFTWARE is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with RETAIL FOOD and OPERA SOFTWARE

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

The idea behind RETAIL FOOD GROUP and OPERA SOFTWARE 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.