Correlation Between Farm Price and ES Ceramics
Can any of the company-specific risk be diversified away by investing in both Farm Price and ES Ceramics 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 Farm Price and ES Ceramics into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Farm Price Holdings and ES Ceramics Technology, you can compare the effects of market volatilities on Farm Price and ES Ceramics 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 Farm Price with a short position of ES Ceramics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Farm Price and ES Ceramics.
Diversification Opportunities for Farm Price and ES Ceramics
0.28 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Farm and 0100 is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Farm Price Holdings and ES Ceramics Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ES Ceramics Technology and Farm Price 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 Farm Price Holdings are associated (or correlated) with ES Ceramics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ES Ceramics Technology has no effect on the direction of Farm Price i.e., Farm Price and ES Ceramics go up and down completely randomly.
Pair Corralation between Farm Price and ES Ceramics
Assuming the 90 days trading horizon Farm Price Holdings is expected to generate 0.85 times more return on investment than ES Ceramics. However, Farm Price Holdings is 1.18 times less risky than ES Ceramics. It trades about 0.06 of its potential returns per unit of risk. ES Ceramics Technology is currently generating about -0.05 per unit of risk. If you would invest 46.00 in Farm Price Holdings on September 2, 2024 and sell it today you would earn a total of 8.00 from holding Farm Price Holdings or generate 17.39% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Farm Price Holdings vs. ES Ceramics Technology
Performance |
| Timeline |
| Farm Price Holdings |
| ES Ceramics Technology |
Farm Price and ES Ceramics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Farm Price and ES Ceramics
The main advantage of trading using opposite Farm Price and ES Ceramics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Farm Price position performs unexpectedly, ES Ceramics 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 ES Ceramics will offset losses from the drop in ES Ceramics' long position.| Farm Price vs. Malayan Banking Bhd | Farm Price vs. Public Bank Bhd | Farm Price vs. Petronas Chemicals Group | Farm Price vs. Tenaga Nasional Bhd |
| ES Ceramics vs. Magni Tech Industries | ES Ceramics vs. Digistar Bhd | ES Ceramics vs. Swift Haulage Bhd | ES Ceramics vs. Insas Bhd |
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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.
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