Correlation Between Joint Stock and NH Foods

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

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

Diversification Opportunities for Joint Stock and NH Foods

0.34

Correlation Coefficient

Joint Stock  NH Foods

Weak diversification

The 3 months correlation between Joint and NIPMY is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Joint Stock and NH Foods Ltd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NH Foods and Joint Stock 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 Joint Stock are associated (or correlated) with NH Foods. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NH Foods has no effect on the direction of Joint Stock i.e., Joint Stock and NH Foods go up and down completely randomly.

Pair Corralation between Joint Stock and NH Foods

Given the investment horizon of 90 days Joint Stock is expected to generate 5.0 times more return on investment than NH Foods. However, Joint Stock is 5.0 times more volatile than NH Foods Ltd. It trades about 0.15 of its potential returns per unit of risk. NH Foods Ltd is currently generating about 0.08 per unit of risk. If you would invest  6,490  in Joint Stock on February 17, 2024 and sell it today you would earn a total of  5,488  from holding Joint Stock or generate 84.56% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	54.83%
Values	Daily Returns

Joint Stock  vs.  NH Foods Ltd

Joint Stock

Risk-Adjusted Performance

10 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Joint Stock are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite fairly uncertain basic indicators, Joint Stock demonstrated solid returns over the last few months and may actually be approaching a breakup point.

NH Foods

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in NH Foods Ltd are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly conflicting primary indicators, NH Foods may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Pair Trading with Joint Stock and NH Foods

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

The idea behind Joint Stock and NH Foods Ltd 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.