Correlation Between Loads and National Foods

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

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

Diversification Opportunities for Loads and National Foods

0.79

Correlation Coefficient

Loads  National Foods

Poor diversification

The 3 months correlation between Loads and National is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Loads and National Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on National Foods and Loads 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 Loads are associated (or correlated) with National Foods. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of National Foods has no effect on the direction of Loads i.e., Loads and National Foods go up and down completely randomly.

Pair Corralation between Loads and National Foods

Assuming the 90 days trading horizon Loads is expected to generate 2.12 times more return on investment than National Foods. However, Loads is 2.12 times more volatile than National Foods. It trades about 0.21 of its potential returns per unit of risk. National Foods is currently generating about 0.12 per unit of risk. If you would invest  1,030  in Loads on September 13, 2024 and sell it today you would earn a total of  521.00  from holding Loads or generate 50.58% return on investment over 90 days.

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

Loads  vs.  National Foods

Loads

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Loads are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite quite weak basic indicators, Loads disclosed solid returns over the last few months and may actually be approaching a breakup point.

National Foods

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in National Foods are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, National Foods may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Loads and National Foods

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

The idea behind Loads and National Foods 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.