Correlation Between SE Education and Food Moments

Can any of the company-specific risk be diversified away by investing in both SE Education and Food Moments 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 SE Education and Food Moments into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between SE Education Public and Food Moments PCL, you can compare the effects of market volatilities on SE Education and Food Moments 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 SE Education with a short position of Food Moments. Check out your portfolio center. Please also check ongoing floating volatility patterns of SE Education and Food Moments.

Diversification Opportunities for SE Education and Food Moments

0.67

Correlation Coefficient

SE Education  Food Moments

Poor diversification

The 3 months correlation between SE-ED and Food is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding SE Education Public and Food Moments PCL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Food Moments PCL and SE Education 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 SE Education Public are associated (or correlated) with Food Moments. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Food Moments PCL has no effect on the direction of SE Education i.e., SE Education and Food Moments go up and down completely randomly.

Pair Corralation between SE Education and Food Moments

Assuming the 90 days trading horizon SE Education Public is expected to generate 0.78 times more return on investment than Food Moments. However, SE Education Public is 1.28 times less risky than Food Moments. It trades about -0.07 of its potential returns per unit of risk. Food Moments PCL is currently generating about -0.18 per unit of risk. If you would invest  204.00  in SE Education Public on October 11, 2024 and sell it today you would lose (4.00) from holding SE Education Public or give up 1.96% of portfolio value over 90 days.

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

SE Education Public  vs.  Food Moments PCL

SE Education Public

Risk-Adjusted Performance

0 of 100

Very Weak

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

Food Moments PCL

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Food Moments PCL has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's fundamental drivers remain quite persistent which may send shares a bit higher in February 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with SE Education and Food Moments

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

The idea behind SE Education Public and Food Moments PCL 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.