Correlation Between Finnovate Acquisition and NH Foods

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

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

Diversification Opportunities for Finnovate Acquisition and NH Foods

0.62

Correlation Coefficient

Finnovate Acquisition  NH Foods

Poor diversification

The 3 months correlation between Finnovate and NIPMY is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Finnovate Acquisition Corp and NH Foods Ltd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NH Foods and Finnovate Acquisition 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 Finnovate Acquisition Corp 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 Finnovate Acquisition i.e., Finnovate Acquisition and NH Foods go up and down completely randomly.

Pair Corralation between Finnovate Acquisition and NH Foods

Given the investment horizon of 90 days Finnovate Acquisition is expected to generate 2.51 times less return on investment than NH Foods. But when comparing it to its historical volatility, Finnovate Acquisition Corp is 3.55 times less risky than NH Foods. It trades about 0.18 of its potential returns per unit of risk. NH Foods Ltd is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  1,625  in NH Foods Ltd on July 23, 2024 and sell it today you would earn a total of  75.00  from holding NH Foods Ltd or generate 4.62% return on investment over 90 days.

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

Finnovate Acquisition Corp  vs.  NH Foods Ltd

Finnovate Acquisition

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Finnovate Acquisition Corp are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Finnovate Acquisition is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

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 strong primary indicators, NH Foods is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Finnovate Acquisition and NH Foods

The main advantage of trading using opposite Finnovate Acquisition and NH Foods positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Finnovate Acquisition 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 Finnovate Acquisition Corp 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.

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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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.