Correlation Between Lanakam SA and Foodlink

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

By analyzing existing cross correlation between Lanakam SA and Foodlink AE, you can compare the effects of market volatilities on Lanakam SA and Foodlink 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 Lanakam SA with a short position of Foodlink. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lanakam SA and Foodlink.

Diversification Opportunities for Lanakam SA and Foodlink

0.66

Correlation Coefficient

Lanakam SA  Foodlink

Poor diversification

The 3 months correlation between Lanakam and Foodlink is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Lanakam SA and Foodlink AE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Foodlink AE and Lanakam SA 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 Lanakam SA are associated (or correlated) with Foodlink. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Foodlink AE has no effect on the direction of Lanakam SA i.e., Lanakam SA and Foodlink go up and down completely randomly.

Pair Corralation between Lanakam SA and Foodlink

Assuming the 90 days trading horizon Lanakam SA is expected to generate 4.14 times less return on investment than Foodlink. In addition to that, Lanakam SA is 1.43 times more volatile than Foodlink AE. It trades about 0.05 of its total potential returns per unit of risk. Foodlink AE is currently generating about 0.3 per unit of volatility. If you would invest  33.00  in Foodlink AE on October 26, 2024 and sell it today you would earn a total of  14.00  from holding Foodlink AE or generate 42.42% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.31%
Values	Daily Returns

Lanakam SA  vs.  Foodlink AE

Lanakam SA

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Lanakam SA are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Lanakam SA may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Foodlink AE

Risk-Adjusted Performance

23 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Foodlink AE are ranked lower than 23 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Foodlink sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Lanakam SA and Foodlink

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

The idea behind Lanakam SA and Foodlink AE 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.