Correlation Between Office Properties and Hanover Foods

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

By analyzing existing cross correlation between Office Properties Income and Hanover Foods, you can compare the effects of market volatilities on Office Properties and Hanover 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 Office Properties with a short position of Hanover Foods. Check out your portfolio center. Please also check ongoing floating volatility patterns of Office Properties and Hanover Foods.

Diversification Opportunities for Office Properties and Hanover Foods

0.1

Correlation Coefficient

Office Properties  Hanover Foods

Average diversification

The 3 months correlation between Office and Hanover is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding Office Properties Income and Hanover Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hanover Foods and Office Properties 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 Office Properties Income are associated (or correlated) with Hanover Foods. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hanover Foods has no effect on the direction of Office Properties i.e., Office Properties and Hanover Foods go up and down completely randomly.

Pair Corralation between Office Properties and Hanover Foods

Assuming the 90 days horizon Office Properties Income is expected to generate 1.53 times more return on investment than Hanover Foods. However, Office Properties is 1.53 times more volatile than Hanover Foods. It trades about 0.04 of its potential returns per unit of risk. Hanover Foods is currently generating about -0.22 per unit of risk. If you would invest  1,181  in Office Properties Income on October 12, 2024 and sell it today you would earn a total of  17.00  from holding Office Properties Income or generate 1.44% return on investment over 90 days.

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

Office Properties Income  vs.  Hanover Foods

Office Properties Income

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Office Properties Income has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unsteady performance, the Stock's basic indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Hanover Foods

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hanover Foods has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Office Properties and Hanover Foods

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

The idea behind Office Properties Income and Hanover Foods 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .