Correlation Between Associated British and NH Foods
Can any of the company-specific risk be diversified away by investing in both Associated British 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 Associated British and NH Foods into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Associated British Foods and NH Foods Ltd, you can compare the effects of market volatilities on Associated British 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 Associated British with a short position of NH Foods. Check out your portfolio center. Please also check ongoing floating volatility patterns of Associated British and NH Foods.
Diversification Opportunities for Associated British and NH Foods
0.14 | Correlation Coefficient |
Average diversification
The 3 months correlation between Associated and NIPMY is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding Associated British Foods and NH Foods Ltd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NH Foods and Associated British 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 Associated British Foods 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 Associated British i.e., Associated British and NH Foods go up and down completely randomly.
Pair Corralation between Associated British and NH Foods
Assuming the 90 days horizon Associated British is expected to generate 2.81 times less return on investment than NH Foods. But when comparing it to its historical volatility, Associated British Foods is 1.13 times less risky than NH Foods. It trades about 0.09 of its potential returns per unit of risk. NH Foods Ltd is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest 1,510 in NH Foods Ltd on January 20, 2024 and sell it today you would earn a total of 115.00 from holding NH Foods Ltd or generate 7.62% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 95.45% |
| Values | Daily Returns |
Associated British Foods vs. NH Foods Ltd
Performance |
| Timeline |
| Associated British Foods |
| NH Foods |
Associated British and NH Foods Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Associated British and NH Foods
The main advantage of trading using opposite Associated British and NH Foods positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Associated British 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.| Associated British vs. Kellanova | Associated British vs. Lancaster Colony | Associated British vs. The A2 Milk | Associated British vs. Altavoz Entertainment |
| NH Foods vs. Kellanova | NH Foods vs. Lancaster Colony | NH Foods vs. The A2 Milk | NH Foods vs. Altavoz Entertainment |
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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.
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