Correlation Between Farm Price and Malaysian Resources
Can any of the company-specific risk be diversified away by investing in both Farm Price and Malaysian Resources 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 Malaysian Resources 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 Malaysian Resources, you can compare the effects of market volatilities on Farm Price and Malaysian Resources 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 Malaysian Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of Farm Price and Malaysian Resources.
Diversification Opportunities for Farm Price and Malaysian Resources
0.3 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Farm and Malaysian is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Farm Price Holdings and Malaysian Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Malaysian Resources 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 Malaysian Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Malaysian Resources has no effect on the direction of Farm Price i.e., Farm Price and Malaysian Resources go up and down completely randomly.
Pair Corralation between Farm Price and Malaysian Resources
Assuming the 90 days trading horizon Farm Price Holdings is expected to generate 1.14 times more return on investment than Malaysian Resources. However, Farm Price is 1.14 times more volatile than Malaysian Resources. It trades about 0.08 of its potential returns per unit of risk. Malaysian Resources is currently generating about 0.06 per unit of risk. If you would invest 41.00 in Farm Price Holdings on September 3, 2024 and sell it today you would earn a total of 13.00 from holding Farm Price Holdings or generate 31.71% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 28.72% |
| Values | Daily Returns |
Farm Price Holdings vs. Malaysian Resources
Performance |
| Timeline |
| Farm Price Holdings |
| Malaysian Resources |
Farm Price and Malaysian Resources Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Farm Price and Malaysian Resources
The main advantage of trading using opposite Farm Price and Malaysian Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Farm Price position performs unexpectedly, Malaysian Resources 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 Malaysian Resources will offset losses from the drop in Malaysian Resources' 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 |
| Malaysian Resources vs. Riverview Rubber Estates | Malaysian Resources vs. Farm Price Holdings | Malaysian Resources vs. Sports Toto Berhad | Malaysian Resources vs. Press Metal 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.
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