Correlation Between Farm Price and Choo Bee
Can any of the company-specific risk be diversified away by investing in both Farm Price and Choo Bee 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 Choo Bee 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 Choo Bee Metal, you can compare the effects of market volatilities on Farm Price and Choo Bee 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 Choo Bee. Check out your portfolio center. Please also check ongoing floating volatility patterns of Farm Price and Choo Bee.
Diversification Opportunities for Farm Price and Choo Bee
0.54 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Farm and Choo is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Farm Price Holdings and Choo Bee Metal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Choo Bee Metal 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 Choo Bee. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Choo Bee Metal has no effect on the direction of Farm Price i.e., Farm Price and Choo Bee go up and down completely randomly.
Pair Corralation between Farm Price and Choo Bee
Assuming the 90 days trading horizon Farm Price Holdings is expected to under-perform the Choo Bee. In addition to that, Farm Price is 1.05 times more volatile than Choo Bee Metal. It trades about -0.43 of its total potential returns per unit of risk. Choo Bee Metal is currently generating about -0.04 per unit of volatility. If you would invest 71.00 in Choo Bee Metal on November 7, 2024 and sell it today you would lose (1.00) from holding Choo Bee Metal or give up 1.41% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 94.74% |
| Values | Daily Returns |
Farm Price Holdings vs. Choo Bee Metal
Performance |
| Timeline |
| Farm Price Holdings |
| Choo Bee Metal |
Farm Price and Choo Bee Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Farm Price and Choo Bee
The main advantage of trading using opposite Farm Price and Choo Bee positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Farm Price position performs unexpectedly, Choo Bee 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 Choo Bee will offset losses from the drop in Choo Bee'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 |
| Choo Bee vs. Greatech Technology Bhd | Choo Bee vs. Globetronics Tech Bhd | Choo Bee vs. Petronas Chemicals Group | Choo Bee vs. YTL Hospitality REIT |
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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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