Correlation Between NightFood Holdings and Social Detention

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

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

Diversification Opportunities for NightFood Holdings and Social Detention

-0.29

Correlation Coefficient

NightFood Holdings  Social Detention

Very good diversification

The 3 months correlation between NightFood and Social is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding NightFood Holdings and Social Detention in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Social Detention and NightFood Holdings 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 NightFood Holdings are associated (or correlated) with Social Detention. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Social Detention has no effect on the direction of NightFood Holdings i.e., NightFood Holdings and Social Detention go up and down completely randomly.

Pair Corralation between NightFood Holdings and Social Detention

Given the investment horizon of 90 days NightFood Holdings is expected to generate 2.54 times more return on investment than Social Detention. However, NightFood Holdings is 2.54 times more volatile than Social Detention. It trades about 0.1 of its potential returns per unit of risk. Social Detention is currently generating about 0.16 per unit of risk. If you would invest  0.69  in NightFood Holdings on December 2, 2024 and sell it today you would earn a total of  0.16  from holding NightFood Holdings or generate 23.19% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	93.02%
Values	Daily Returns

NightFood Holdings  vs.  Social Detention

NightFood Holdings

Risk-Adjusted Performance

Very Weak

Over the last 90 days NightFood Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, NightFood Holdings is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Social Detention

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Social Detention are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady fundamental indicators, Social Detention exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with NightFood Holdings and Social Detention

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

The idea behind NightFood Holdings and Social Detention 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.