Correlation Between New Tech and Mlk Foods

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

By analyzing existing cross correlation between New Tech Venture and Mlk Foods Public, you can compare the effects of market volatilities on New Tech and Mlk 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 New Tech with a short position of Mlk Foods. Check out your portfolio center. Please also check ongoing floating volatility patterns of New Tech and Mlk Foods.

Diversification Opportunities for New Tech and Mlk Foods

0.75

Correlation Coefficient

New Tech  Mlk Foods

Poor diversification

The 3 months correlation between New and Mlk is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding New Tech Venture and Mlk Foods Public in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mlk Foods Public and New Tech 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 New Tech Venture are associated (or correlated) with Mlk Foods. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mlk Foods Public has no effect on the direction of New Tech i.e., New Tech and Mlk Foods go up and down completely randomly.

Pair Corralation between New Tech and Mlk Foods

Assuming the 90 days trading horizon New Tech is expected to generate 1.53 times less return on investment than Mlk Foods. But when comparing it to its historical volatility, New Tech Venture is 1.11 times less risky than Mlk Foods. It trades about 0.11 of its potential returns per unit of risk. Mlk Foods Public is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  120.00  in Mlk Foods Public on December 28, 2024 and sell it today you would earn a total of  108.00  from holding Mlk Foods Public or generate 90.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	91.94%
Values	Daily Returns

New Tech Venture  vs.  Mlk Foods Public

New Tech Venture

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in New Tech Venture are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, New Tech reported solid returns over the last few months and may actually be approaching a breakup point.

Mlk Foods Public

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Mlk Foods Public are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Mlk Foods reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with New Tech and Mlk Foods

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

The idea behind New Tech Venture and Mlk Foods Public 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.