Correlation Between Earth Alive and High Liner

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

By analyzing existing cross correlation between Earth Alive Clean and High Liner Foods, you can compare the effects of market volatilities on Earth Alive and High Liner 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 Earth Alive with a short position of High Liner. Check out your portfolio center. Please also check ongoing floating volatility patterns of Earth Alive and High Liner.

Diversification Opportunities for Earth Alive and High Liner

0.0

Correlation Coefficient

Earth Alive  High Liner

Pay attention - limited upside

The 3 months correlation between Earth and High is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Earth Alive Clean and High Liner Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on High Liner Foods and Earth Alive 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 Earth Alive Clean are associated (or correlated) with High Liner. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of High Liner Foods has no effect on the direction of Earth Alive i.e., Earth Alive and High Liner go up and down completely randomly.

Pair Corralation between Earth Alive and High Liner

Assuming the 90 days horizon Earth Alive Clean is expected to generate 12.25 times more return on investment than High Liner. However, Earth Alive is 12.25 times more volatile than High Liner Foods. It trades about 0.06 of its potential returns per unit of risk. High Liner Foods is currently generating about 0.11 per unit of risk. If you would invest  1.50  in Earth Alive Clean on September 21, 2024 and sell it today you would lose (1.00) from holding Earth Alive Clean or give up 66.67% of portfolio value over 90 days.

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

Earth Alive Clean  vs.  High Liner Foods

Earth Alive Clean

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Earth Alive Clean has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Earth Alive is not utilizing all of its potentials. The recent stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

High Liner Foods

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in High Liner Foods are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating technical and fundamental indicators, High Liner displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Earth Alive and High Liner

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

The idea behind Earth Alive Clean and High Liner Foods 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.