Correlation Between FARM FRESH and Nova Wellness
Can any of the company-specific risk be diversified away by investing in both FARM FRESH and Nova Wellness 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 FRESH and Nova Wellness into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between FARM FRESH BERHAD and Nova Wellness Group, you can compare the effects of market volatilities on FARM FRESH and Nova Wellness 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 FRESH with a short position of Nova Wellness. Check out your portfolio center. Please also check ongoing floating volatility patterns of FARM FRESH and Nova Wellness.
Diversification Opportunities for FARM FRESH and Nova Wellness
-0.21 | Correlation Coefficient |
Very good diversification
The 3 months correlation between FARM and Nova is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding FARM FRESH BERHAD and Nova Wellness Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nova Wellness Group and FARM FRESH 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 FRESH BERHAD are associated (or correlated) with Nova Wellness. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nova Wellness Group has no effect on the direction of FARM FRESH i.e., FARM FRESH and Nova Wellness go up and down completely randomly.
Pair Corralation between FARM FRESH and Nova Wellness
Assuming the 90 days trading horizon FARM FRESH BERHAD is expected to generate 0.65 times more return on investment than Nova Wellness. However, FARM FRESH BERHAD is 1.55 times less risky than Nova Wellness. It trades about 0.05 of its potential returns per unit of risk. Nova Wellness Group is currently generating about -0.08 per unit of risk. If you would invest 178.00 in FARM FRESH BERHAD on October 26, 2024 and sell it today you would earn a total of 4.00 from holding FARM FRESH BERHAD or generate 2.25% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
FARM FRESH BERHAD vs. Nova Wellness Group
Performance |
| Timeline |
| FARM FRESH BERHAD |
| Nova Wellness Group |
FARM FRESH and Nova Wellness Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with FARM FRESH and Nova Wellness
The main advantage of trading using opposite FARM FRESH and Nova Wellness positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if FARM FRESH position performs unexpectedly, Nova Wellness 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 Nova Wellness will offset losses from the drop in Nova Wellness' long position.| FARM FRESH vs. Nestle Bhd | FARM FRESH vs. PPB Group Bhd | FARM FRESH vs. IOI Bhd | FARM FRESH vs. FGV Holdings Bhd |
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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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