Correlation Between Millennium Food and First International

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

By analyzing existing cross correlation between Millennium Food Tech LP and First International Bank, you can compare the effects of market volatilities on Millennium Food and First International 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 Millennium Food with a short position of First International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Millennium Food and First International.

Diversification Opportunities for Millennium Food and First International

-0.06

Correlation Coefficient

Millennium Food  First International

Good diversification

The 3 months correlation between Millennium and First is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding Millennium Food Tech LP and First International Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First International Bank and Millennium 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 Millennium Food Tech LP are associated (or correlated) with First International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First International Bank has no effect on the direction of Millennium Food i.e., Millennium Food and First International go up and down completely randomly.

Pair Corralation between Millennium Food and First International

Assuming the 90 days trading horizon Millennium Food is expected to generate 1.05 times less return on investment than First International. In addition to that, Millennium Food is 3.2 times more volatile than First International Bank. It trades about 0.06 of its total potential returns per unit of risk. First International Bank is currently generating about 0.19 per unit of volatility. If you would invest  1,716,409  in First International Bank on November 27, 2024 and sell it today you would earn a total of  189,591  from holding First International Bank or generate 11.05% return on investment over 90 days.

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

Millennium Food Tech LP  vs.  First International Bank

Millennium Food Tech

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Millennium Food Tech LP are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Millennium Food sustained solid returns over the last few months and may actually be approaching a breakup point.

First International Bank

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in First International Bank are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, First International sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Millennium Food and First International

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

The idea behind Millennium Food Tech LP and First International Bank 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.