Correlation Between Distilleries Company and HVA Foods

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

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

Diversification Opportunities for Distilleries Company and HVA Foods

0.58

Correlation Coefficient

Distilleries Company  HVA Foods

Very weak diversification

The 3 months correlation between Distilleries and HVA is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Distilleries Company of and HVA Foods PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HVA Foods PLC and Distilleries Company 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 Distilleries Company of are associated (or correlated) with HVA Foods. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HVA Foods PLC has no effect on the direction of Distilleries Company i.e., Distilleries Company and HVA Foods go up and down completely randomly.

Pair Corralation between Distilleries Company and HVA Foods

Assuming the 90 days trading horizon Distilleries Company of is expected to generate 0.31 times more return on investment than HVA Foods. However, Distilleries Company of is 3.2 times less risky than HVA Foods. It trades about 0.41 of its potential returns per unit of risk. HVA Foods PLC is currently generating about 0.1 per unit of risk. If you would invest  2,550  in Distilleries Company of on September 17, 2024 and sell it today you would earn a total of  1,050  from holding Distilleries Company of or generate 41.18% return on investment over 90 days.

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

Distilleries Company of  vs.  HVA Foods PLC

Distilleries Company

Risk-Adjusted Performance

32 of 100

Very Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Distilleries Company of are ranked lower than 32 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Distilleries Company sustained solid returns over the last few months and may actually be approaching a breakup point.

HVA Foods PLC

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in HVA Foods PLC are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, HVA Foods sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Distilleries Company and HVA Foods

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

The idea behind Distilleries Company of and HVA Foods PLC 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.