Correlation Between Farm Price and Press Metal
Can any of the company-specific risk be diversified away by investing in both Farm Price and Press Metal 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 Press Metal 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 Press Metal Bhd, you can compare the effects of market volatilities on Farm Price and Press Metal 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 Press Metal. Check out your portfolio center. Please also check ongoing floating volatility patterns of Farm Price and Press Metal.
Diversification Opportunities for Farm Price and Press Metal
0.63 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Farm and Press is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Farm Price Holdings and Press Metal Bhd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Press Metal Bhd 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 Press Metal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Press Metal Bhd has no effect on the direction of Farm Price i.e., Farm Price and Press Metal go up and down completely randomly.
Pair Corralation between Farm Price and Press Metal
Assuming the 90 days trading horizon Farm Price Holdings is expected to generate 1.48 times more return on investment than Press Metal. However, Farm Price is 1.48 times more volatile than Press Metal Bhd. It trades about 0.05 of its potential returns per unit of risk. Press Metal Bhd is currently generating about -0.04 per unit of risk. If you would invest 47.00 in Farm Price Holdings on August 27, 2024 and sell it today you would earn a total of 7.00 from holding Farm Price Holdings or generate 14.89% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Farm Price Holdings vs. Press Metal Bhd
Performance |
| Timeline |
| Farm Price Holdings |
| Press Metal Bhd |
Farm Price and Press Metal Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Farm Price and Press Metal
The main advantage of trading using opposite Farm Price and Press Metal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Farm Price position performs unexpectedly, Press Metal 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 Press Metal will offset losses from the drop in Press Metal'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 |
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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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