Correlation Between Quanex Building and Premium Catering

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Can any of the company-specific risk be diversified away by investing in both Quanex Building and Premium Catering 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 Quanex Building and Premium Catering into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Quanex Building Products and Premium Catering Limited, you can compare the effects of market volatilities on Quanex Building and Premium Catering 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 Quanex Building with a short position of Premium Catering. Check out your portfolio center. Please also check ongoing floating volatility patterns of Quanex Building and Premium Catering.

Diversification Opportunities for Quanex Building and Premium Catering

-0.4
  Correlation Coefficient

Very good diversification

The 3 months correlation between Quanex and Premium is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding Quanex Building Products and Premium Catering Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Premium Catering and Quanex Building 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 Quanex Building Products are associated (or correlated) with Premium Catering. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Premium Catering has no effect on the direction of Quanex Building i.e., Quanex Building and Premium Catering go up and down completely randomly.

Pair Corralation between Quanex Building and Premium Catering

Allowing for the 90-day total investment horizon Quanex Building Products is expected to under-perform the Premium Catering. But the stock apears to be less risky and, when comparing its historical volatility, Quanex Building Products is 2.71 times less risky than Premium Catering. The stock trades about -0.16 of its potential returns per unit of risk. The Premium Catering Limited is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  66.00  in Premium Catering Limited on September 18, 2024 and sell it today you would earn a total of  10.06  from holding Premium Catering Limited or generate 15.24% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthVery Weak
Accuracy95.24%
ValuesDaily Returns

Quanex Building Products  vs.  Premium Catering Limited

 Performance 
       Timeline  
Quanex Building Products 

Risk-Adjusted Performance

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Weak
 
Strong
Very Weak
Over the last 90 days Quanex Building Products has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Quanex Building is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.
Premium Catering 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Premium Catering Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's fundamental indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Quanex Building and Premium Catering Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Quanex Building and Premium Catering

The main advantage of trading using opposite Quanex Building and Premium Catering positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Quanex Building position performs unexpectedly, Premium Catering 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 Premium Catering will offset losses from the drop in Premium Catering's long position.
The idea behind Quanex Building Products and Premium Catering Limited 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.

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