Correlation Between Retail Food and ACDC Metals

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

Diversification Opportunities for Retail Food and ACDC Metals

-0.28

Correlation Coefficient

Retail Food  ACDC Metals

Very good diversification

The 3 months correlation between Retail and ACDC is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding Retail Food Group and ACDC Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ACDC Metals 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 ACDC Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ACDC Metals has no effect on the direction of Retail Food i.e., Retail Food and ACDC Metals go up and down completely randomly.

Pair Corralation between Retail Food and ACDC Metals

Assuming the 90 days trading horizon Retail Food is expected to generate 3.5 times less return on investment than ACDC Metals. But when comparing it to its historical volatility, Retail Food Group is 2.22 times less risky than ACDC Metals. It trades about 0.04 of its potential returns per unit of risk. ACDC Metals is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  5.20  in ACDC Metals on September 16, 2024 and sell it today you would earn a total of  0.70  from holding ACDC Metals or generate 13.46% return on investment over 90 days.

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

Retail Food Group  vs.  ACDC Metals

Retail Food Group

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Retail Food Group are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable technical and fundamental indicators, Retail Food is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

ACDC Metals

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in ACDC Metals are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain fundamental indicators, ACDC Metals unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Retail Food and ACDC Metals

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

The idea behind Retail Food Group and ACDC Metals 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.