Correlation Between Nafoods Group and Transimex Transportation

Can any of the company-specific risk be diversified away by investing in both Nafoods Group and Transimex Transportation 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 Transimex Transportation 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 Transimex Transportation JSC, you can compare the effects of market volatilities on Nafoods Group and Transimex Transportation 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 Transimex Transportation. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nafoods Group and Transimex Transportation.

Diversification Opportunities for Nafoods Group and Transimex Transportation

0.09

Correlation Coefficient

Nafoods Group  Transimex Transportation

Significant diversification

The 3 months correlation between Nafoods and Transimex is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Nafoods Group JSC and Transimex Transportation JSC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Transimex Transportation 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 Transimex Transportation. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Transimex Transportation has no effect on the direction of Nafoods Group i.e., Nafoods Group and Transimex Transportation go up and down completely randomly.

Pair Corralation between Nafoods Group and Transimex Transportation

Assuming the 90 days trading horizon Nafoods Group JSC is expected to generate 1.76 times more return on investment than Transimex Transportation. However, Nafoods Group is 1.76 times more volatile than Transimex Transportation JSC. It trades about 0.04 of its potential returns per unit of risk. Transimex Transportation JSC is currently generating about -0.04 per unit of risk. If you would invest  1,950,000  in Nafoods Group JSC on September 19, 2024 and sell it today you would earn a total of  20,000  from holding Nafoods Group JSC or generate 1.03% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	72.73%
Values	Daily Returns

Nafoods Group JSC  vs.  Transimex Transportation JSC

Nafoods Group JSC

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Nafoods Group JSC are ranked lower than 3 (%) 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.

Transimex Transportation

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Transimex Transportation JSC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Transimex Transportation is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Nafoods Group and Transimex Transportation

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

The idea behind Nafoods Group JSC and Transimex Transportation JSC 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.