Correlation Between Food Life and Public Storage

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

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

Diversification Opportunities for Food Life and Public Storage

-0.14

Correlation Coefficient

Food Life  Public Storage

Good diversification

The 3 months correlation between Food and Public is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding Food Life Companies and Public Storage in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Public Storage and Food Life 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 Food Life Companies are associated (or correlated) with Public Storage. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Public Storage has no effect on the direction of Food Life i.e., Food Life and Public Storage go up and down completely randomly.

Pair Corralation between Food Life and Public Storage

Assuming the 90 days horizon Food Life Companies is expected to generate 1.53 times more return on investment than Public Storage. However, Food Life is 1.53 times more volatile than Public Storage. It trades about 0.03 of its potential returns per unit of risk. Public Storage is currently generating about 0.04 per unit of risk. If you would invest  1,760  in Food Life Companies on September 28, 2024 and sell it today you would earn a total of  340.00  from holding Food Life Companies or generate 19.32% return on investment over 90 days.

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

Food Life Companies  vs.  Public Storage

Food Life Companies

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Food Life Companies are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Food Life reported solid returns over the last few months and may actually be approaching a breakup point.

Public Storage

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Food Life and Public Storage

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

The idea behind Food Life Companies and Public Storage 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.