Correlation Between Microfriend and FarmStory
Can any of the company-specific risk be diversified away by investing in both Microfriend and FarmStory 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 Microfriend and FarmStory into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microfriend and FarmStory Co, you can compare the effects of market volatilities on Microfriend and FarmStory 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 Microfriend with a short position of FarmStory. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microfriend and FarmStory.
Diversification Opportunities for Microfriend and FarmStory
0.22 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Microfriend and FarmStory is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Microfriend and FarmStory Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FarmStory and Microfriend 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 Microfriend are associated (or correlated) with FarmStory. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FarmStory has no effect on the direction of Microfriend i.e., Microfriend and FarmStory go up and down completely randomly.
Pair Corralation between Microfriend and FarmStory
Assuming the 90 days trading horizon Microfriend is expected to generate 1.5 times more return on investment than FarmStory. However, Microfriend is 1.5 times more volatile than FarmStory Co. It trades about -0.01 of its potential returns per unit of risk. FarmStory Co is currently generating about -0.03 per unit of risk. If you would invest 497,000 in Microfriend on August 26, 2024 and sell it today you would lose (189,000) from holding Microfriend or give up 38.03% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Microfriend vs. FarmStory Co
Performance |
| Timeline |
| Microfriend |
| FarmStory |
Microfriend and FarmStory Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microfriend and FarmStory
The main advantage of trading using opposite Microfriend and FarmStory positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microfriend position performs unexpectedly, FarmStory 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 FarmStory will offset losses from the drop in FarmStory's long position.| Microfriend vs. PJ Metal Co | Microfriend vs. Eagon Industrial Co | Microfriend vs. Lotte Data Communication | Microfriend vs. Mobile Appliance |
| FarmStory vs. AptaBio Therapeutics | FarmStory vs. Daewoo SBI SPAC | FarmStory vs. Dream Security co | FarmStory vs. Microfriend |
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 Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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