Correlation Between Whole Earth and Borealis Foods

Can any of the company-specific risk be diversified away by investing in both Whole Earth and Borealis Foods 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 Whole Earth and Borealis Foods into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Whole Earth Brands and Borealis Foods, you can compare the effects of market volatilities on Whole Earth and Borealis Foods 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 Whole Earth with a short position of Borealis Foods. Check out your portfolio center. Please also check ongoing floating volatility patterns of Whole Earth and Borealis Foods.

Diversification Opportunities for Whole Earth and Borealis Foods

-0.02

Correlation Coefficient

Whole Earth  Borealis Foods

Good diversification

The 3 months correlation between Whole and Borealis is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding Whole Earth Brands and Borealis Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Borealis Foods and Whole Earth 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 Whole Earth Brands are associated (or correlated) with Borealis Foods. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Borealis Foods has no effect on the direction of Whole Earth i.e., Whole Earth and Borealis Foods go up and down completely randomly.

Pair Corralation between Whole Earth and Borealis Foods

Assuming the 90 days horizon Whole Earth Brands is expected to generate 4.6 times more return on investment than Borealis Foods. However, Whole Earth is 4.6 times more volatile than Borealis Foods. It trades about 0.05 of its potential returns per unit of risk. Borealis Foods is currently generating about 0.02 per unit of risk. If you would invest  35.00  in Whole Earth Brands on February 16, 2024 and sell it today you would lose (31.78) from holding Whole Earth Brands or give up 90.8% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	17.09%
Values	Daily Returns

Whole Earth Brands  vs.  Borealis Foods

Whole Earth Brands

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Whole Earth Brands has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly abnormal technical and fundamental indicators, Whole Earth may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Borealis Foods

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Borealis Foods has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in June 2024. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Pair Trading with Whole Earth and Borealis Foods

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

The idea behind Whole Earth Brands and Borealis Foods 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.