Correlation Between Nichirei and Better Choice

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

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

Diversification Opportunities for Nichirei and Better Choice

0.0

Correlation Coefficient

Nichirei  Better Choice

Pay attention - limited upside

The 3 months correlation between Nichirei and Better is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Nichirei and Better Choice in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Better Choice and Nichirei 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 Nichirei are associated (or correlated) with Better Choice. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Better Choice has no effect on the direction of Nichirei i.e., Nichirei and Better Choice go up and down completely randomly.

Pair Corralation between Nichirei and Better Choice

Assuming the 90 days horizon Nichirei is expected to generate 0.22 times more return on investment than Better Choice. However, Nichirei is 4.53 times less risky than Better Choice. It trades about -0.02 of its potential returns per unit of risk. Better Choice is currently generating about -0.02 per unit of risk. If you would invest  1,267  in Nichirei on October 3, 2024 and sell it today you would lose (57.00) from holding Nichirei or give up 4.5% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	98.43%
Values	Daily Returns

Nichirei  vs.  Better Choice

Nichirei

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Nichirei has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong technical and fundamental indicators, Nichirei is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Better Choice

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Better Choice are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Better Choice reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Nichirei and Better Choice

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

The idea behind Nichirei and Better Choice 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .