Correlation Between J+J SNACK and Food Life
Can any of the company-specific risk be diversified away by investing in both J+J SNACK and Food Life 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 J+J SNACK and Food Life into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between JJ SNACK FOODS and Food Life Companies, you can compare the effects of market volatilities on J+J SNACK and Food Life 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 J+J SNACK with a short position of Food Life. Check out your portfolio center. Please also check ongoing floating volatility patterns of J+J SNACK and Food Life.
Diversification Opportunities for J+J SNACK and Food Life
Very poor diversification
The 3 months correlation between J+J and Food is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding JJ SNACK FOODS and Food Life Companies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Food Life Companies and J+J SNACK 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 JJ SNACK FOODS are associated (or correlated) with Food Life. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Food Life Companies has no effect on the direction of J+J SNACK i.e., J+J SNACK and Food Life go up and down completely randomly.
Pair Corralation between J+J SNACK and Food Life
Assuming the 90 days trading horizon J+J SNACK is expected to generate 307.75 times less return on investment than Food Life. But when comparing it to its historical volatility, JJ SNACK FOODS is 2.3 times less risky than Food Life. It trades about 0.0 of its potential returns per unit of risk. Food Life Companies is currently generating about 0.45 of returns per unit of risk over similar time horizon. If you would invest 1,890 in Food Life Companies on September 10, 2024 and sell it today you would earn a total of 310.00 from holding Food Life Companies or generate 16.4% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Strong |
Accuracy | 100.0% |
Values | Daily Returns |
JJ SNACK FOODS vs. Food Life Companies
Performance |
Timeline |
JJ SNACK FOODS |
Food Life Companies |
J+J SNACK and Food Life Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with J+J SNACK and Food Life
The main advantage of trading using opposite J+J SNACK and Food Life positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if J+J SNACK position performs unexpectedly, Food Life 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 Food Life will offset losses from the drop in Food Life's long position.J+J SNACK vs. Nestl SA | J+J SNACK vs. Kraft Heinz Co | J+J SNACK vs. General Mills | J+J SNACK vs. General Mills |
Food Life vs. McDonalds | Food Life vs. Superior Plus Corp | Food Life vs. NMI Holdings | Food Life vs. Origin Agritech |
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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.
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