Correlation Between National Foods and 786 Investment

Can any of the company-specific risk be diversified away by investing in both National Foods and 786 Investment 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 National Foods and 786 Investment into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between National Foods and 786 Investment Limited, you can compare the effects of market volatilities on National Foods and 786 Investment 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 National Foods with a short position of 786 Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of National Foods and 786 Investment.

Diversification Opportunities for National Foods and 786 Investment

-0.3

Correlation Coefficient

National Foods  786 Investment

Very good diversification

The 3 months correlation between National and 786 is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding National Foods and 786 Investment Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on 786 Investment and National Foods 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 National Foods are associated (or correlated) with 786 Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of 786 Investment has no effect on the direction of National Foods i.e., National Foods and 786 Investment go up and down completely randomly.

Pair Corralation between National Foods and 786 Investment

Assuming the 90 days trading horizon National Foods is expected to generate 0.51 times more return on investment than 786 Investment. However, National Foods is 1.98 times less risky than 786 Investment. It trades about 0.11 of its potential returns per unit of risk. 786 Investment Limited is currently generating about 0.02 per unit of risk. If you would invest  19,312  in National Foods on December 28, 2024 and sell it today you would earn a total of  2,208  from holding National Foods or generate 11.43% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.39%
Values	Daily Returns

National Foods  vs.  786 Investment Limited

National Foods

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in National Foods are ranked lower than 8 (%) 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 April 2025.

786 Investment

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in 786 Investment Limited are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, 786 Investment is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with National Foods and 786 Investment

The main advantage of trading using opposite National Foods and 786 Investment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if National Foods position performs unexpectedly, 786 Investment 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 786 Investment will offset losses from the drop in 786 Investment's long position.

The idea behind National Foods and 786 Investment Limited 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.