Correlation Between FarmStory and KMH Hitech
Can any of the company-specific risk be diversified away by investing in both FarmStory and KMH Hitech 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 FarmStory and KMH Hitech into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between FarmStory Co and KMH Hitech Co, you can compare the effects of market volatilities on FarmStory and KMH Hitech 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 FarmStory with a short position of KMH Hitech. Check out your portfolio center. Please also check ongoing floating volatility patterns of FarmStory and KMH Hitech.
Diversification Opportunities for FarmStory and KMH Hitech
0.94 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between FarmStory and KMH is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding FarmStory Co and KMH Hitech Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KMH Hitech and FarmStory 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 FarmStory Co are associated (or correlated) with KMH Hitech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KMH Hitech has no effect on the direction of FarmStory i.e., FarmStory and KMH Hitech go up and down completely randomly.
Pair Corralation between FarmStory and KMH Hitech
Assuming the 90 days trading horizon FarmStory Co is expected to under-perform the KMH Hitech. But the stock apears to be less risky and, when comparing its historical volatility, FarmStory Co is 1.25 times less risky than KMH Hitech. The stock trades about -0.19 of its potential returns per unit of risk. The KMH Hitech Co is currently generating about -0.12 of returns per unit of risk over similar time horizon. If you would invest 96,400 in KMH Hitech Co on August 29, 2024 and sell it today you would lose (5,600) from holding KMH Hitech Co or give up 5.81% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 95.65% |
| Values | Daily Returns |
FarmStory Co vs. KMH Hitech Co
Performance |
| Timeline |
| FarmStory |
| KMH Hitech |
FarmStory and KMH Hitech Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with FarmStory and KMH Hitech
The main advantage of trading using opposite FarmStory and KMH Hitech positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if FarmStory position performs unexpectedly, KMH Hitech 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 KMH Hitech will offset losses from the drop in KMH Hitech's long position.| FarmStory vs. Samsung Electronics Co | FarmStory vs. Samsung Electronics Co | FarmStory vs. Hyundai Motor Co | FarmStory vs. Hyundai Motor |
| KMH Hitech vs. Daou Data Corp | KMH Hitech vs. Busan Industrial Co | KMH Hitech vs. Busan Ind | KMH Hitech vs. Shinhan WTI Futures |
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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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