Correlation Between Pardee Resources and Hanover Foods

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

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

Diversification Opportunities for Pardee Resources and Hanover Foods

0.08

Correlation Coefficient

Pardee Resources  Hanover Foods

Significant diversification

The 3 months correlation between Pardee and Hanover is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Pardee Resources Co and Hanover Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hanover Foods and Pardee Resources 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 Pardee Resources Co 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 Pardee Resources i.e., Pardee Resources and Hanover Foods go up and down completely randomly.

Pair Corralation between Pardee Resources and Hanover Foods

Given the investment horizon of 90 days Pardee Resources Co is expected to generate 3.1 times more return on investment than Hanover Foods. However, Pardee Resources is 3.1 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 0.05 per unit of risk. If you would invest  22,754  in Pardee Resources Co on September 25, 2024 and sell it today you would earn a total of  9,824  from holding Pardee Resources Co or generate 43.17% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	88.71%
Values	Daily Returns

Pardee Resources Co  vs.  Hanover Foods

Pardee Resources

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Pardee Resources Co are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Even with relatively unfluctuating technical and fundamental indicators, Pardee Resources reported solid returns over the last few months and may actually be approaching a breakup point.

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 somewhat strong basic indicators, Hanover Foods is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Pardee Resources and Hanover Foods

The main advantage of trading using opposite Pardee Resources and Hanover Foods positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pardee Resources 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 Pardee Resources Co 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.