Correlation Between Roshan Packages and National Foods

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

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

Diversification Opportunities for Roshan Packages and National Foods

0.79

Correlation Coefficient

Roshan Packages  National Foods

Poor diversification

The 3 months correlation between Roshan and National is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Roshan Packages and National Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on National Foods and Roshan Packages 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 Roshan Packages are associated (or correlated) with National Foods. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of National Foods has no effect on the direction of Roshan Packages i.e., Roshan Packages and National Foods go up and down completely randomly.

Pair Corralation between Roshan Packages and National Foods

Assuming the 90 days trading horizon Roshan Packages is expected to under-perform the National Foods. In addition to that, Roshan Packages is 1.62 times more volatile than National Foods. It trades about -0.07 of its total potential returns per unit of risk. National Foods is currently generating about 0.07 per unit of volatility. If you would invest  18,451  in National Foods on October 11, 2024 and sell it today you would earn a total of  550.00  from holding National Foods or generate 2.98% return on investment over 90 days.

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

Roshan Packages  vs.  National Foods

Roshan Packages

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Roshan Packages are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Roshan Packages reported solid returns over the last few months and may actually be approaching a breakup point.

National Foods

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in National Foods are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, National Foods may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Roshan Packages and National Foods

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

The idea behind Roshan Packages and National 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.

Check out your portfolio center.

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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.