Correlation Between Mamas Creations and Continental Beverage

Can any of the company-specific risk be diversified away by investing in both Mamas Creations and Continental Beverage 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 Mamas Creations and Continental Beverage into the same portfolio, which is an essential part of the fundamental portfolio management process.

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

Diversification Opportunities for Mamas Creations and Continental Beverage

-0.77

Correlation Coefficient

Mamas Creations  Continental Beverage

Pay attention - limited upside

The 3 months correlation between Mamas and Continental is -0.77. Overlapping area represents the amount of risk that can be diversified away by holding Mamas Creations and Continental Beverage Brands in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Continental Beverage and Mamas Creations 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 Mamas Creations are associated (or correlated) with Continental Beverage. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Continental Beverage has no effect on the direction of Mamas Creations i.e., Mamas Creations and Continental Beverage go up and down completely randomly.

Pair Corralation between Mamas Creations and Continental Beverage

Given the investment horizon of 90 days Mamas Creations is expected to generate 5.05 times more return on investment than Continental Beverage. However, Mamas Creations is 5.05 times more volatile than Continental Beverage Brands. It trades about 0.11 of its potential returns per unit of risk. Continental Beverage Brands is currently generating about -0.13 per unit of risk. If you would invest  624.00  in Mamas Creations on June 21, 2024 and sell it today you would earn a total of  136.00  from holding Mamas Creations or generate 21.79% return on investment over 90 days.

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

Mamas Creations  vs.  Continental Beverage Brands

Mamas Creations

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Mamas Creations are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak primary indicators, Mamas Creations sustained solid returns over the last few months and may actually be approaching a breakup point.

Continental Beverage

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Continental Beverage Brands has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong fundamental drivers, Continental Beverage is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Mamas Creations and Continental Beverage

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

The idea behind Mamas Creations and Continental Beverage Brands 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.