Correlation Between South Books and Nafoods Group

Can any of the company-specific risk be diversified away by investing in both South Books and Nafoods Group 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 South Books and Nafoods Group into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between South Books Educational and Nafoods Group JSC, you can compare the effects of market volatilities on South Books and Nafoods Group 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 South Books with a short position of Nafoods Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of South Books and Nafoods Group.

Diversification Opportunities for South Books and Nafoods Group

0.41

Correlation Coefficient

South Books  Nafoods Group

Very weak diversification

The 3 months correlation between South and Nafoods is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding South Books Educational and Nafoods Group JSC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nafoods Group JSC and South Books 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 South Books Educational are associated (or correlated) with Nafoods Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nafoods Group JSC has no effect on the direction of South Books i.e., South Books and Nafoods Group go up and down completely randomly.

Pair Corralation between South Books and Nafoods Group

Assuming the 90 days trading horizon South Books Educational is expected to generate 1.99 times more return on investment than Nafoods Group. However, South Books is 1.99 times more volatile than Nafoods Group JSC. It trades about 0.04 of its potential returns per unit of risk. Nafoods Group JSC is currently generating about 0.08 per unit of risk. If you would invest  1,258,919  in South Books Educational on December 21, 2024 and sell it today you would earn a total of  41,081  from holding South Books Educational or generate 3.26% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	72.41%
Values	Daily Returns

South Books Educational  vs.  Nafoods Group JSC

South Books Educational

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in South Books Educational are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, South Books may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Nafoods Group JSC

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Nafoods Group JSC are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of very weak technical and fundamental indicators, Nafoods Group may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with South Books and Nafoods Group

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

The idea behind South Books Educational and Nafoods Group JSC 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.