Correlation Between Bikaji Foods and Touchwood Entertainment

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

By analyzing existing cross correlation between Bikaji Foods International and Touchwood Entertainment Limited, you can compare the effects of market volatilities on Bikaji Foods and Touchwood Entertainment 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 Bikaji Foods with a short position of Touchwood Entertainment. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bikaji Foods and Touchwood Entertainment.

Diversification Opportunities for Bikaji Foods and Touchwood Entertainment

0.82

Correlation Coefficient

Bikaji Foods  Touchwood Entertainment

Very poor diversification

The 3 months correlation between Bikaji and Touchwood is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Bikaji Foods International and Touchwood Entertainment Limite in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Touchwood Entertainment and Bikaji Foods 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 Bikaji Foods International are associated (or correlated) with Touchwood Entertainment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Touchwood Entertainment has no effect on the direction of Bikaji Foods i.e., Bikaji Foods and Touchwood Entertainment go up and down completely randomly.

Pair Corralation between Bikaji Foods and Touchwood Entertainment

Assuming the 90 days trading horizon Bikaji Foods International is expected to under-perform the Touchwood Entertainment. But the stock apears to be less risky and, when comparing its historical volatility, Bikaji Foods International is 1.14 times less risky than Touchwood Entertainment. The stock trades about -0.01 of its potential returns per unit of risk. The Touchwood Entertainment Limited is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  14,813  in Touchwood Entertainment Limited on September 12, 2024 and sell it today you would earn a total of  1,161  from holding Touchwood Entertainment Limited or generate 7.84% return on investment over 90 days.

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

Bikaji Foods International  vs.  Touchwood Entertainment Limite

Bikaji Foods Interna

Risk-Adjusted Performance

0 of 100

Very Weak

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

Touchwood Entertainment

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Touchwood Entertainment Limited are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, Touchwood Entertainment may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Bikaji Foods and Touchwood Entertainment

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

The idea behind Bikaji Foods International and Touchwood Entertainment Limited 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..