Correlation Between Food Moments and Central Retail

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

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

Diversification Opportunities for Food Moments and Central Retail

-0.25

Correlation Coefficient

Food Moments  Central Retail

Very good diversification

The 3 months correlation between Food and Central is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding Food Moments PCL and Central Retail in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Central Retail and Food Moments 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 Food Moments PCL are associated (or correlated) with Central Retail. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Central Retail has no effect on the direction of Food Moments i.e., Food Moments and Central Retail go up and down completely randomly.

Pair Corralation between Food Moments and Central Retail

Assuming the 90 days horizon Food Moments PCL is expected to under-perform the Central Retail. In addition to that, Food Moments is 1.08 times more volatile than Central Retail. It trades about -0.14 of its total potential returns per unit of risk. Central Retail is currently generating about 0.19 per unit of volatility. If you would invest  3,100  in Central Retail on September 26, 2024 and sell it today you would earn a total of  425.00  from holding Central Retail or generate 13.71% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	97.56%
Values	Daily Returns

Food Moments PCL  vs.  Central Retail

Food Moments PCL

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Food Moments PCL has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's fundamental drivers remain quite persistent which may send shares a bit higher in January 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Central Retail

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Central Retail are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting fundamental indicators, Central Retail may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Food Moments and Central Retail

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

The idea behind Food Moments PCL and Central Retail 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.