Correlation Between Edita Food and ODIN Investments

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

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

Diversification Opportunities for Edita Food and ODIN Investments

0.23

Correlation Coefficient

Edita Food  ODIN Investments

Modest diversification

The 3 months correlation between Edita and ODIN is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Edita Food Industries and ODIN Investments in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ODIN Investments and Edita Food 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 Edita Food Industries are associated (or correlated) with ODIN Investments. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ODIN Investments has no effect on the direction of Edita Food i.e., Edita Food and ODIN Investments go up and down completely randomly.

Pair Corralation between Edita Food and ODIN Investments

Assuming the 90 days trading horizon Edita Food is expected to generate 103.53 times less return on investment than ODIN Investments. But when comparing it to its historical volatility, Edita Food Industries is 1.4 times less risky than ODIN Investments. It trades about 0.0 of its potential returns per unit of risk. ODIN Investments is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  164.00  in ODIN Investments on September 15, 2024 and sell it today you would earn a total of  22.00  from holding ODIN Investments or generate 13.41% return on investment over 90 days.

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

Edita Food Industries  vs.  ODIN Investments

Edita Food Industries

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Edita Food Industries are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable technical and fundamental indicators, Edita Food is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

ODIN Investments

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in ODIN Investments are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile technical and fundamental indicators, ODIN Investments may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Edita Food and ODIN Investments

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

The idea behind Edita Food Industries and ODIN Investments 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.