Correlation Between Convenience Foods and Aitken Spence

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

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

Diversification Opportunities for Convenience Foods and Aitken Spence

-0.32

Correlation Coefficient

Convenience Foods  Aitken Spence

Very good diversification

The 3 months correlation between Convenience and Aitken is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding Convenience Foods PLC and Aitken Spence Hotel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aitken Spence Hotel and Convenience Foods 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 Convenience Foods PLC are associated (or correlated) with Aitken Spence. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aitken Spence Hotel has no effect on the direction of Convenience Foods i.e., Convenience Foods and Aitken Spence go up and down completely randomly.

Pair Corralation between Convenience Foods and Aitken Spence

Assuming the 90 days trading horizon Convenience Foods PLC is expected to generate 1.83 times more return on investment than Aitken Spence. However, Convenience Foods is 1.83 times more volatile than Aitken Spence Hotel. It trades about 0.15 of its potential returns per unit of risk. Aitken Spence Hotel is currently generating about -0.05 per unit of risk. If you would invest  96,575  in Convenience Foods PLC on December 27, 2024 and sell it today you would earn a total of  31,250  from holding Convenience Foods PLC or generate 32.36% return on investment over 90 days.

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

Convenience Foods PLC  vs.  Aitken Spence Hotel

Convenience Foods PLC

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Convenience Foods PLC are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Convenience Foods sustained solid returns over the last few months and may actually be approaching a breakup point.

Aitken Spence Hotel

Risk-Adjusted Performance

Very Weak

Over the last 90 days Aitken Spence Hotel has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Aitken Spence is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Convenience Foods and Aitken Spence

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

The idea behind Convenience Foods PLC and Aitken Spence Hotel 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 Global Correlations module to find global opportunities by holding instruments from different markets.