Correlation Between RETAIL FOOD and Tradeweb Markets

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

By analyzing existing cross correlation between RETAIL FOOD GROUP and Tradeweb Markets, you can compare the effects of market volatilities on RETAIL FOOD and Tradeweb Markets 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 RETAIL FOOD with a short position of Tradeweb Markets. Check out your portfolio center. Please also check ongoing floating volatility patterns of RETAIL FOOD and Tradeweb Markets.

Diversification Opportunities for RETAIL FOOD and Tradeweb Markets

0.41

Correlation Coefficient

RETAIL FOOD  Tradeweb Markets

Very weak diversification

The 3 months correlation between RETAIL and Tradeweb is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding RETAIL FOOD GROUP and Tradeweb Markets in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tradeweb Markets and RETAIL 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 RETAIL FOOD GROUP are associated (or correlated) with Tradeweb Markets. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tradeweb Markets has no effect on the direction of RETAIL FOOD i.e., RETAIL FOOD and Tradeweb Markets go up and down completely randomly.

Pair Corralation between RETAIL FOOD and Tradeweb Markets

Assuming the 90 days trading horizon RETAIL FOOD is expected to generate 2.18 times less return on investment than Tradeweb Markets. In addition to that, RETAIL FOOD is 1.22 times more volatile than Tradeweb Markets. It trades about 0.08 of its total potential returns per unit of risk. Tradeweb Markets is currently generating about 0.22 per unit of volatility. If you would invest  10,592  in Tradeweb Markets on September 4, 2024 and sell it today you would earn a total of  2,398  from holding Tradeweb Markets or generate 22.64% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.46%
Values	Daily Returns

RETAIL FOOD GROUP  vs.  Tradeweb Markets

RETAIL FOOD GROUP

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in RETAIL FOOD GROUP are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain basic indicators, RETAIL FOOD may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Tradeweb Markets

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Tradeweb Markets are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Tradeweb Markets reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with RETAIL FOOD and Tradeweb Markets

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

The idea behind RETAIL FOOD GROUP and Tradeweb Markets 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.