Correlation Between Nocera and Borealis Foods

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

By analyzing existing cross correlation between Nocera Inc and Borealis Foods, you can compare the effects of market volatilities on Nocera and Borealis Foods 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 Borealis Foods. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nocera and Borealis Foods.

Diversification Opportunities for Nocera and Borealis Foods

-0.42

Correlation Coefficient

Nocera  Borealis Foods

Very good diversification

The 3 months correlation between Nocera and Borealis is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding Nocera Inc and Borealis Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Borealis Foods 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 Borealis Foods. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Borealis Foods has no effect on the direction of Nocera i.e., Nocera and Borealis Foods go up and down completely randomly.

Pair Corralation between Nocera and Borealis Foods

Given the investment horizon of 90 days Nocera is expected to generate 11.22 times less return on investment than Borealis Foods. But when comparing it to its historical volatility, Nocera Inc is 1.71 times less risky than Borealis Foods. It trades about 0.01 of its potential returns per unit of risk. Borealis Foods is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  7.11  in Borealis Foods on October 3, 2024 and sell it today you would lose (0.11) from holding Borealis Foods or give up 1.55% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	79.78%
Values	Daily Returns

Nocera Inc  vs.  Borealis Foods

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.

Borealis Foods

Risk-Adjusted Performance

2 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Borealis Foods are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating basic indicators, Borealis Foods showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Nocera and Borealis Foods

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

The idea behind Nocera Inc and Borealis Foods 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.