Correlation Between Fresh Grapes and SW Seed

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

By analyzing existing cross correlation between Fresh Grapes LLC and SW Seed Company, you can compare the effects of market volatilities on Fresh Grapes and SW Seed 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 Fresh Grapes with a short position of SW Seed. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fresh Grapes and SW Seed.

Diversification Opportunities for Fresh Grapes and SW Seed

-0.42

Correlation Coefficient

Fresh Grapes  SW Seed

Very good diversification

The 3 months correlation between Fresh and SANW is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding Fresh Grapes LLC and SW Seed Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SW Seed Company and Fresh Grapes 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 Fresh Grapes LLC are associated (or correlated) with SW Seed. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SW Seed Company has no effect on the direction of Fresh Grapes i.e., Fresh Grapes and SW Seed go up and down completely randomly.

Pair Corralation between Fresh Grapes and SW Seed

Given the investment horizon of 90 days Fresh Grapes LLC is expected to generate 0.88 times more return on investment than SW Seed. However, Fresh Grapes LLC is 1.14 times less risky than SW Seed. It trades about 0.16 of its potential returns per unit of risk. SW Seed Company is currently generating about 0.1 per unit of risk. If you would invest  34.00  in Fresh Grapes LLC on September 1, 2024 and sell it today you would earn a total of  35.00  from holding Fresh Grapes LLC or generate 102.94% return on investment over 90 days.

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

Fresh Grapes LLC  vs.  SW Seed Company

Fresh Grapes LLC

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Fresh Grapes LLC are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile basic indicators, Fresh Grapes exhibited solid returns over the last few months and may actually be approaching a breakup point.

SW Seed Company

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in SW Seed Company are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, SW Seed showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Fresh Grapes and SW Seed

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

The idea behind Fresh Grapes LLC and SW Seed Company 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.