Correlation Between NH Foods and Associated British
Can any of the company-specific risk be diversified away by investing in both NH Foods and Associated British 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 NH Foods and Associated British into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NH Foods Ltd and Associated British Foods, you can compare the effects of market volatilities on NH Foods and Associated British 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 NH Foods with a short position of Associated British. Check out your portfolio center. Please also check ongoing floating volatility patterns of NH Foods and Associated British.
Diversification Opportunities for NH Foods and Associated British
0.41 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between NIPMY and Associated is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding NH Foods Ltd and Associated British Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Associated British Foods and NH Foods 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 NH Foods Ltd are associated (or correlated) with Associated British. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Associated British Foods has no effect on the direction of NH Foods i.e., NH Foods and Associated British go up and down completely randomly.
Pair Corralation between NH Foods and Associated British
Assuming the 90 days horizon NH Foods is expected to generate 1.07 times less return on investment than Associated British. But when comparing it to its historical volatility, NH Foods Ltd is 1.64 times less risky than Associated British. It trades about 0.22 of its potential returns per unit of risk. Associated British Foods is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest 3,114 in Associated British Foods on January 26, 2024 and sell it today you would earn a total of 241.00 from holding Associated British Foods or generate 7.74% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
NH Foods Ltd vs. Associated British Foods
Performance |
| Timeline |
| NH Foods |
| Associated British Foods |
NH Foods and Associated British Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with NH Foods and Associated British
The main advantage of trading using opposite NH Foods and Associated British positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NH Foods position performs unexpectedly, Associated British 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 Associated British will offset losses from the drop in Associated British's long position.| NH Foods vs. Kellanova | NH Foods vs. Lancaster Colony | NH Foods vs. The A2 Milk | NH Foods vs. Artisan Consumer Goods |
| Associated British vs. Kellanova | Associated British vs. Lancaster Colony | Associated British vs. The A2 Milk | Associated British vs. Artisan Consumer Goods |
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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.
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