Correlation Between ALLTEL and Where Food

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

By analyzing existing cross correlation between ALLTEL P 7875 and Where Food Comes, you can compare the effects of market volatilities on ALLTEL and Where 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 ALLTEL with a short position of Where Food. Check out your portfolio center. Please also check ongoing floating volatility patterns of ALLTEL and Where Food.

Diversification Opportunities for ALLTEL and Where Food

0.06

Correlation Coefficient

ALLTEL  Where Food

Significant diversification

The 3 months correlation between ALLTEL and Where is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding ALLTEL P 7875 and Where Food Comes in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Where Food Comes and ALLTEL 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 ALLTEL P 7875 are associated (or correlated) with Where Food. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Where Food Comes has no effect on the direction of ALLTEL i.e., ALLTEL and Where Food go up and down completely randomly.

Pair Corralation between ALLTEL and Where Food

Assuming the 90 days trading horizon ALLTEL P 7875 is expected to generate 0.64 times more return on investment than Where Food. However, ALLTEL P 7875 is 1.57 times less risky than Where Food. It trades about -0.02 of its potential returns per unit of risk. Where Food Comes is currently generating about -0.03 per unit of risk. If you would invest  11,389  in ALLTEL P 7875 on December 23, 2024 and sell it today you would lose (186.00) from holding ALLTEL P 7875 or give up 1.63% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	54.1%
Values	Daily Returns

ALLTEL P 7875  vs.  Where Food Comes

ALLTEL P 7875

Risk-Adjusted Performance

Very Weak

Over the last 90 days ALLTEL P 7875 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, ALLTEL is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Where Food Comes

Risk-Adjusted Performance

Very Weak

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

Pair Trading with ALLTEL and Where Food

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

The idea behind ALLTEL P 7875 and Where Food Comes 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.