Correlation Between Spuntech and Millennium Food

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

By analyzing existing cross correlation between Spuntech and Millennium Food Tech LP, you can compare the effects of market volatilities on Spuntech and Millennium Food 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 Spuntech with a short position of Millennium Food. Check out your portfolio center. Please also check ongoing floating volatility patterns of Spuntech and Millennium Food.

Diversification Opportunities for Spuntech and Millennium Food

-0.38

Correlation Coefficient

Spuntech  Millennium Food

Very good diversification

The 3 months correlation between Spuntech and Millennium is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding Spuntech and Millennium Food Tech LP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Millennium Food Tech and Spuntech 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 Spuntech are associated (or correlated) with Millennium Food. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Millennium Food Tech has no effect on the direction of Spuntech i.e., Spuntech and Millennium Food go up and down completely randomly.

Pair Corralation between Spuntech and Millennium Food

Assuming the 90 days trading horizon Spuntech is expected to under-perform the Millennium Food. But the stock apears to be less risky and, when comparing its historical volatility, Spuntech is 1.1 times less risky than Millennium Food. The stock trades about -0.04 of its potential returns per unit of risk. The Millennium Food Tech LP is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  20,160  in Millennium Food Tech LP on December 24, 2024 and sell it today you would lose (1,090) from holding Millennium Food Tech LP or give up 5.41% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.08%
Values	Daily Returns

Spuntech  vs.  Millennium Food Tech LP

Spuntech

Risk-Adjusted Performance

Very Weak

Over the last 90 days Spuntech has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Millennium Food Tech

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Spuntech and Millennium Food

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

The idea behind Spuntech and Millennium Food Tech LP 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.