Correlation Between Nates Food and Scepter Holdings

Can any of the company-specific risk be diversified away by investing in both Nates Food and Scepter Holdings 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 Scepter Holdings 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 Scepter Holdings, you can compare the effects of market volatilities on Nates Food and Scepter Holdings 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 Scepter Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nates Food and Scepter Holdings.

Diversification Opportunities for Nates Food and Scepter Holdings

0.44

Correlation Coefficient

Nates Food  Scepter Holdings

Very weak diversification

The 3 months correlation between Nates and Scepter is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Nates Food Co and Scepter Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Scepter Holdings 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 Scepter Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Scepter Holdings has no effect on the direction of Nates Food i.e., Nates Food and Scepter Holdings go up and down completely randomly.

Pair Corralation between Nates Food and Scepter Holdings

Given the investment horizon of 90 days Nates Food Co is expected to generate 13.85 times more return on investment than Scepter Holdings. However, Nates Food is 13.85 times more volatile than Scepter Holdings. It trades about 0.22 of its potential returns per unit of risk. Scepter Holdings is currently generating about 0.18 per unit of risk. If you would invest  0.00  in Nates Food Co on December 28, 2024 and sell it today you would earn a total of  0.01  from holding Nates Food Co or generate 9.223372036854776E16% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	93.33%
Values	Daily Returns

Nates Food Co  vs.  Scepter Holdings

Nates Food

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Nates Food Co are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating primary indicators, Nates Food exhibited solid returns over the last few months and may actually be approaching a breakup point.

Scepter Holdings

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Scepter Holdings are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite quite unfluctuating basic indicators, Scepter Holdings disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Nates Food and Scepter Holdings

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

The idea behind Nates Food Co and Scepter Holdings 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.