Correlation Between Nafoods Group and DIC Holdings

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

By analyzing existing cross correlation between Nafoods Group JSC and DIC Holdings Construction, you can compare the effects of market volatilities on Nafoods Group and DIC Holdings 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 Nafoods Group with a short position of DIC Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nafoods Group and DIC Holdings.

Diversification Opportunities for Nafoods Group and DIC Holdings

-0.53

Correlation Coefficient

Nafoods Group  DIC Holdings

Excellent diversification

The 3 months correlation between Nafoods and DIC is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding Nafoods Group JSC and DIC Holdings Construction in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DIC Holdings Construction and Nafoods Group 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 Nafoods Group JSC are associated (or correlated) with DIC Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DIC Holdings Construction has no effect on the direction of Nafoods Group i.e., Nafoods Group and DIC Holdings go up and down completely randomly.

Pair Corralation between Nafoods Group and DIC Holdings

Assuming the 90 days trading horizon Nafoods Group is expected to generate 6.34 times less return on investment than DIC Holdings. But when comparing it to its historical volatility, Nafoods Group JSC is 1.48 times less risky than DIC Holdings. It trades about 0.03 of its potential returns per unit of risk. DIC Holdings Construction is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  1,095,000  in DIC Holdings Construction on September 20, 2024 and sell it today you would earn a total of  255,000  from holding DIC Holdings Construction or generate 23.29% return on investment over 90 days.

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

Nafoods Group JSC  vs.  DIC Holdings Construction

Nafoods Group JSC

Risk-Adjusted Performance

2 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Nafoods Group JSC are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy technical and fundamental indicators, Nafoods Group is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

DIC Holdings Construction

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in DIC Holdings Construction are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, DIC Holdings displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Nafoods Group and DIC Holdings

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

The idea behind Nafoods Group JSC and DIC Holdings Construction 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.