Correlation Between Farm Price and Oriental Food
Can any of the company-specific risk be diversified away by investing in both Farm Price and Oriental Food 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 Oriental Food 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 Oriental Food Industries, you can compare the effects of market volatilities on Farm Price and Oriental Food 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 Oriental Food. Check out your portfolio center. Please also check ongoing floating volatility patterns of Farm Price and Oriental Food.
Diversification Opportunities for Farm Price and Oriental Food
0.81 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Farm and Oriental is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Farm Price Holdings and Oriental Food Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Oriental Food Industries 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 Oriental Food. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Oriental Food Industries has no effect on the direction of Farm Price i.e., Farm Price and Oriental Food go up and down completely randomly.
Pair Corralation between Farm Price and Oriental Food
Assuming the 90 days trading horizon Farm Price Holdings is expected to under-perform the Oriental Food. In addition to that, Farm Price is 1.03 times more volatile than Oriental Food Industries. It trades about -0.34 of its total potential returns per unit of risk. Oriental Food Industries is currently generating about -0.02 per unit of volatility. If you would invest 160.00 in Oriental Food Industries on November 28, 2024 and sell it today you would lose (1.00) from holding Oriental Food Industries or give up 0.62% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Farm Price Holdings vs. Oriental Food Industries
Performance |
| Timeline |
| Farm Price Holdings |
| Oriental Food Industries |
Farm Price and Oriental Food Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Farm Price and Oriental Food
The main advantage of trading using opposite Farm Price and Oriental Food positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Farm Price position performs unexpectedly, Oriental Food 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 Oriental Food will offset losses from the drop in Oriental Food's long position.| Farm Price vs. Star Media Group | Farm Price vs. Steel Hawk Berhad | Farm Price vs. Mycron Steel Bhd | Farm Price vs. Apollo Food Holdings |
| Oriental Food vs. FARM FRESH BERHAD | Oriental Food vs. Supercomnet Technologies Bhd | Oriental Food vs. Berjaya Food Bhd | Oriental Food vs. Resintech 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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.
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