Correlation Between Nates Food and Branded Legacy

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

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

Diversification Opportunities for Nates Food and Branded Legacy

0.0

Correlation Coefficient

Nates Food  Branded Legacy

Pay attention - limited upside

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

Pair Corralation between Nates Food and Branded Legacy

Given the investment horizon of 90 days Nates Food Co is expected to under-perform the Branded Legacy. But the pink sheet apears to be less risky and, when comparing its historical volatility, Nates Food Co is 2.72 times less risky than Branded Legacy. The pink sheet trades about -0.04 of its potential returns per unit of risk. The Branded Legacy is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  0.20  in Branded Legacy on September 3, 2024 and sell it today you would lose (0.10) from holding Branded Legacy or give up 50.0% of portfolio value over 90 days.

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

Nates Food Co  vs.  Branded Legacy

Nates Food

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Nates Food Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound primary indicators, Nates Food is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Branded Legacy

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Branded Legacy are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly conflicting technical and fundamental indicators, Branded Legacy reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Nates Food and Branded Legacy

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

The idea behind Nates Food Co and Branded Legacy 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.