Correlation Between RETAIL FOOD and INTERSHOP Communications

Can any of the company-specific risk be diversified away by investing in both RETAIL FOOD and INTERSHOP Communications 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 INTERSHOP Communications 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 INTERSHOP Communications Aktiengesellschaft, you can compare the effects of market volatilities on RETAIL FOOD and INTERSHOP Communications 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 INTERSHOP Communications. Check out your portfolio center. Please also check ongoing floating volatility patterns of RETAIL FOOD and INTERSHOP Communications.

Diversification Opportunities for RETAIL FOOD and INTERSHOP Communications

0.49

Correlation Coefficient

RETAIL FOOD  INTERSHOP Communications

Very weak diversification

The 3 months correlation between RETAIL and INTERSHOP is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding RETAIL FOOD GROUP and INTERSHOP Communications Aktie in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on INTERSHOP Communications 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 INTERSHOP Communications. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of INTERSHOP Communications has no effect on the direction of RETAIL FOOD i.e., RETAIL FOOD and INTERSHOP Communications go up and down completely randomly.

Pair Corralation between RETAIL FOOD and INTERSHOP Communications

Assuming the 90 days trading horizon RETAIL FOOD GROUP is expected to generate 0.79 times more return on investment than INTERSHOP Communications. However, RETAIL FOOD GROUP is 1.27 times less risky than INTERSHOP Communications. It trades about 0.08 of its potential returns per unit of risk. INTERSHOP Communications Aktiengesellschaft is currently generating about 0.03 per unit of risk. If you would invest  3.85  in RETAIL FOOD GROUP on September 1, 2024 and sell it today you would earn a total of  0.35  from holding RETAIL FOOD GROUP or generate 9.09% return on investment over 90 days.

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

RETAIL FOOD GROUP  vs.  INTERSHOP Communications Aktie

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 fragile basic indicators, RETAIL FOOD may actually be approaching a critical reversion point that can send shares even higher in December 2024.

INTERSHOP Communications

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in INTERSHOP Communications Aktiengesellschaft are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, INTERSHOP Communications is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with RETAIL FOOD and INTERSHOP Communications

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

The idea behind RETAIL FOOD GROUP and INTERSHOP Communications Aktiengesellschaft 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..