Correlation Between Gourmet Master and BizLink Holding

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

By analyzing existing cross correlation between Gourmet Master Co and BizLink Holding, you can compare the effects of market volatilities on Gourmet Master and BizLink Holding 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 Gourmet Master with a short position of BizLink Holding. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gourmet Master and BizLink Holding.

Diversification Opportunities for Gourmet Master and BizLink Holding

0.75

Correlation Coefficient

Gourmet Master  BizLink Holding

Poor diversification

The 3 months correlation between Gourmet and BizLink is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Gourmet Master Co and BizLink Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BizLink Holding and Gourmet Master 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 Gourmet Master Co are associated (or correlated) with BizLink Holding. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BizLink Holding has no effect on the direction of Gourmet Master i.e., Gourmet Master and BizLink Holding go up and down completely randomly.

Pair Corralation between Gourmet Master and BizLink Holding

Assuming the 90 days trading horizon Gourmet Master is expected to generate 2.83 times less return on investment than BizLink Holding. But when comparing it to its historical volatility, Gourmet Master Co is 1.84 times less risky than BizLink Holding. It trades about 0.14 of its potential returns per unit of risk. BizLink Holding is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest  43,300  in BizLink Holding on September 3, 2024 and sell it today you would earn a total of  22,400  from holding BizLink Holding or generate 51.73% return on investment over 90 days.

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

Gourmet Master Co  vs.  BizLink Holding

Gourmet Master

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Gourmet Master Co are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Gourmet Master showed solid returns over the last few months and may actually be approaching a breakup point.

BizLink Holding

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in BizLink Holding are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, BizLink Holding showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Gourmet Master and BizLink Holding

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

The idea behind Gourmet Master Co and BizLink Holding 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.