Correlation Between Farm Price and Sunway Construction
Can any of the company-specific risk be diversified away by investing in both Farm Price and Sunway Construction 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 Sunway Construction 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 Sunway Construction Group, you can compare the effects of market volatilities on Farm Price and Sunway Construction 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 Sunway Construction. Check out your portfolio center. Please also check ongoing floating volatility patterns of Farm Price and Sunway Construction.
Diversification Opportunities for Farm Price and Sunway Construction
0.06 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Farm and Sunway is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding Farm Price Holdings and Sunway Construction Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sunway Construction 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 Sunway Construction. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sunway Construction has no effect on the direction of Farm Price i.e., Farm Price and Sunway Construction go up and down completely randomly.
Pair Corralation between Farm Price and Sunway Construction
Assuming the 90 days trading horizon Farm Price Holdings is expected to generate 0.42 times more return on investment than Sunway Construction. However, Farm Price Holdings is 2.39 times less risky than Sunway Construction. It trades about -0.56 of its potential returns per unit of risk. Sunway Construction Group is currently generating about -0.26 per unit of risk. If you would invest 52.00 in Farm Price Holdings on October 20, 2024 and sell it today you would lose (9.00) from holding Farm Price Holdings or give up 17.31% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Farm Price Holdings vs. Sunway Construction Group
Performance |
| Timeline |
| Farm Price Holdings |
| Sunway Construction |
Farm Price and Sunway Construction Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Farm Price and Sunway Construction
The main advantage of trading using opposite Farm Price and Sunway Construction positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Farm Price position performs unexpectedly, Sunway Construction 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 Sunway Construction will offset losses from the drop in Sunway Construction's 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 |
| Sunway Construction vs. ES Ceramics Technology | Sunway Construction vs. Sports Toto Berhad | Sunway Construction vs. Shangri La Hotels | Sunway Construction vs. Cosmos Technology International |
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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.
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