Correlation Between THORNEY TECHS and Food Life

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

By analyzing existing cross correlation between THORNEY TECHS LTD and Food Life Companies, you can compare the effects of market volatilities on THORNEY TECHS and Food Life 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 THORNEY TECHS with a short position of Food Life. Check out your portfolio center. Please also check ongoing floating volatility patterns of THORNEY TECHS and Food Life.

Diversification Opportunities for THORNEY TECHS and Food Life

-0.39

Correlation Coefficient

THORNEY TECHS  Food Life

Very good diversification

The 3 months correlation between THORNEY and Food is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding THORNEY TECHS LTD and Food Life Companies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Food Life Companies and THORNEY TECHS 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 THORNEY TECHS LTD are associated (or correlated) with Food Life. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Food Life Companies has no effect on the direction of THORNEY TECHS i.e., THORNEY TECHS and Food Life go up and down completely randomly.

Pair Corralation between THORNEY TECHS and Food Life

Assuming the 90 days horizon THORNEY TECHS LTD is expected to under-perform the Food Life. In addition to that, THORNEY TECHS is 2.25 times more volatile than Food Life Companies. It trades about -0.02 of its total potential returns per unit of risk. Food Life Companies is currently generating about 0.13 per unit of volatility. If you would invest  1,750  in Food Life Companies on October 4, 2024 and sell it today you would earn a total of  250.00  from holding Food Life Companies or generate 14.29% return on investment over 90 days.

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

THORNEY TECHS LTD  vs.  Food Life Companies

THORNEY TECHS LTD

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days THORNEY TECHS LTD has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, THORNEY TECHS is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Food Life Companies

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Food Life Companies are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, Food Life reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with THORNEY TECHS and Food Life

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

The idea behind THORNEY TECHS LTD and Food Life Companies 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.