Correlation Between Fresh Grapes and Hanover Foods

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

By analyzing existing cross correlation between Fresh Grapes LLC and Hanover Foods, you can compare the effects of market volatilities on Fresh Grapes and Hanover Foods 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 Fresh Grapes with a short position of Hanover Foods. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fresh Grapes and Hanover Foods.

Diversification Opportunities for Fresh Grapes and Hanover Foods

0.1

Correlation Coefficient

Fresh Grapes  Hanover Foods

Average diversification

The 3 months correlation between Fresh and Hanover is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding Fresh Grapes LLC and Hanover Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hanover Foods and Fresh Grapes 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 Fresh Grapes LLC are associated (or correlated) with Hanover Foods. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hanover Foods has no effect on the direction of Fresh Grapes i.e., Fresh Grapes and Hanover Foods go up and down completely randomly.

Pair Corralation between Fresh Grapes and Hanover Foods

Given the investment horizon of 90 days Fresh Grapes LLC is expected to under-perform the Hanover Foods. In addition to that, Fresh Grapes is 5.91 times more volatile than Hanover Foods. It trades about -0.03 of its total potential returns per unit of risk. Hanover Foods is currently generating about -0.07 per unit of volatility. If you would invest  6,300  in Hanover Foods on October 14, 2024 and sell it today you would lose (456.00) from holding Hanover Foods or give up 7.24% of portfolio value over 90 days.

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

Fresh Grapes LLC  vs.  Hanover Foods

Fresh Grapes LLC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Fresh Grapes LLC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in February 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Hanover Foods

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hanover Foods has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Fresh Grapes and Hanover Foods

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

The idea behind Fresh Grapes LLC and Hanover Foods 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.