Correlation Between Economic Investment and High Liner

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

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

Diversification Opportunities for Economic Investment and High Liner

0.43

Correlation Coefficient

Economic Investment  High Liner

Very weak diversification

The 3 months correlation between Economic and High is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Economic Investment Trust 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 Economic Investment 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 Economic Investment Trust 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 Economic Investment i.e., Economic Investment and High Liner go up and down completely randomly.

Pair Corralation between Economic Investment and High Liner

Assuming the 90 days trading horizon Economic Investment Trust is expected to under-perform the High Liner. But the stock apears to be less risky and, when comparing its historical volatility, Economic Investment Trust is 1.17 times less risky than High Liner. The stock trades about -0.32 of its potential returns per unit of risk. The High Liner Foods is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  1,545  in High Liner Foods on October 1, 2024 and sell it today you would earn a total of  47.00  from holding High Liner Foods or generate 3.04% return on investment over 90 days.

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

Economic Investment Trust  vs.  High Liner Foods

Economic Investment Trust

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Economic Investment Trust are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Economic Investment is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

High Liner Foods

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in High Liner Foods are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. In spite of very uncertain 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 Economic Investment and High Liner

The main advantage of trading using opposite Economic Investment and High Liner positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Economic Investment 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 Economic Investment Trust 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.