Correlation Between Frontdoor and Goodfood Market

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

By analyzing existing cross correlation between Frontdoor and Goodfood Market Corp, you can compare the effects of market volatilities on Frontdoor and Goodfood Market 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 Frontdoor with a short position of Goodfood Market. Check out your portfolio center. Please also check ongoing floating volatility patterns of Frontdoor and Goodfood Market.

Diversification Opportunities for Frontdoor and Goodfood Market

0.87

Correlation Coefficient

Frontdoor  Goodfood Market

Very poor diversification

The 3 months correlation between Frontdoor and Goodfood is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Frontdoor and Goodfood Market Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Goodfood Market Corp and Frontdoor 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 Frontdoor are associated (or correlated) with Goodfood Market. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Goodfood Market Corp has no effect on the direction of Frontdoor i.e., Frontdoor and Goodfood Market go up and down completely randomly.

Pair Corralation between Frontdoor and Goodfood Market

Given the investment horizon of 90 days Frontdoor is expected to generate 3.05 times less return on investment than Goodfood Market. But when comparing it to its historical volatility, Frontdoor is 3.12 times less risky than Goodfood Market. It trades about 0.18 of its potential returns per unit of risk. Goodfood Market Corp is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  19.00  in Goodfood Market Corp on September 4, 2024 and sell it today you would earn a total of  14.00  from holding Goodfood Market Corp or generate 73.68% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	96.92%
Values	Daily Returns

Frontdoor  vs.  Goodfood Market Corp

Frontdoor

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Frontdoor are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Even with relatively unfluctuating fundamental indicators, Frontdoor reported solid returns over the last few months and may actually be approaching a breakup point.

Goodfood Market Corp

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Goodfood Market Corp are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite nearly unfluctuating technical and fundamental indicators, Goodfood Market reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Frontdoor and Goodfood Market

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

The idea behind Frontdoor and Goodfood Market Corp 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.