Correlation Between Foodnamoo and Pungguk Ethanol

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

By analyzing existing cross correlation between Foodnamoo and Pungguk Ethanol Industrial, you can compare the effects of market volatilities on Foodnamoo and Pungguk Ethanol 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 Foodnamoo with a short position of Pungguk Ethanol. Check out your portfolio center. Please also check ongoing floating volatility patterns of Foodnamoo and Pungguk Ethanol.

Diversification Opportunities for Foodnamoo and Pungguk Ethanol

0.6

Correlation Coefficient

Foodnamoo  Pungguk Ethanol

Poor diversification

The 3 months correlation between Foodnamoo and Pungguk is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Foodnamoo and Pungguk Ethanol Industrial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pungguk Ethanol Indu and Foodnamoo 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 Foodnamoo are associated (or correlated) with Pungguk Ethanol. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pungguk Ethanol Indu has no effect on the direction of Foodnamoo i.e., Foodnamoo and Pungguk Ethanol go up and down completely randomly.

Pair Corralation between Foodnamoo and Pungguk Ethanol

Assuming the 90 days trading horizon Foodnamoo is expected to under-perform the Pungguk Ethanol. In addition to that, Foodnamoo is 2.58 times more volatile than Pungguk Ethanol Industrial. It trades about -0.06 of its total potential returns per unit of risk. Pungguk Ethanol Industrial is currently generating about -0.03 per unit of volatility. If you would invest  1,138,246  in Pungguk Ethanol Industrial on September 15, 2024 and sell it today you would lose (183,246) from holding Pungguk Ethanol Industrial or give up 16.1% of portfolio value over 90 days.

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

Foodnamoo  vs.  Pungguk Ethanol Industrial

Foodnamoo

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pungguk Ethanol Indu

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Foodnamoo and Pungguk Ethanol

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

The idea behind Foodnamoo and Pungguk Ethanol Industrial 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.