Correlation Between Nocera and Above Food

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

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

Diversification Opportunities for Nocera and Above Food

-0.23

Correlation Coefficient

Nocera  Above Food

Very good diversification

The 3 months correlation between Nocera and Above is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding Nocera Inc and Above Food Ingredients in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Above Food Ingredients and Nocera 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 Nocera Inc are associated (or correlated) with Above Food. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Above Food Ingredients has no effect on the direction of Nocera i.e., Nocera and Above Food go up and down completely randomly.

Pair Corralation between Nocera and Above Food

Given the investment horizon of 90 days Nocera is expected to generate 38.51 times less return on investment than Above Food. But when comparing it to its historical volatility, Nocera Inc is 3.1 times less risky than Above Food. It trades about 0.01 of its potential returns per unit of risk. Above Food Ingredients is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  8.95  in Above Food Ingredients on September 30, 2024 and sell it today you would lose (5.95) from holding Above Food Ingredients or give up 66.48% of portfolio value over 90 days.

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

Nocera Inc  vs.  Above Food Ingredients

Nocera Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Nocera Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Nocera is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Above Food Ingredients

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Above Food Ingredients are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal technical and fundamental indicators, Above Food showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Nocera and Above Food

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

The idea behind Nocera Inc and Above Food Ingredients 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.