Correlation Between Central Industrial and FARM FRESH
Can any of the company-specific risk be diversified away by investing in both Central Industrial and FARM FRESH 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 Central Industrial and FARM FRESH into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Central Industrial Corp and FARM FRESH BERHAD, you can compare the effects of market volatilities on Central Industrial and FARM FRESH 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 Central Industrial with a short position of FARM FRESH. Check out your portfolio center. Please also check ongoing floating volatility patterns of Central Industrial and FARM FRESH.
Diversification Opportunities for Central Industrial and FARM FRESH
-0.14 | Correlation Coefficient |
Good diversification
The 3 months correlation between Central and FARM is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding Central Industrial Corp and FARM FRESH BERHAD in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FARM FRESH BERHAD and Central Industrial 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 Central Industrial Corp are associated (or correlated) with FARM FRESH. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FARM FRESH BERHAD has no effect on the direction of Central Industrial i.e., Central Industrial and FARM FRESH go up and down completely randomly.
Pair Corralation between Central Industrial and FARM FRESH
Assuming the 90 days trading horizon Central Industrial Corp is expected to generate 0.54 times more return on investment than FARM FRESH. However, Central Industrial Corp is 1.86 times less risky than FARM FRESH. It trades about 0.19 of its potential returns per unit of risk. FARM FRESH BERHAD is currently generating about 0.06 per unit of risk. If you would invest 84.00 in Central Industrial Corp on September 4, 2024 and sell it today you would earn a total of 3.00 from holding Central Industrial Corp or generate 3.57% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Central Industrial Corp vs. FARM FRESH BERHAD
Performance |
| Timeline |
| Central Industrial Corp |
| FARM FRESH BERHAD |
Central Industrial and FARM FRESH Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Central Industrial and FARM FRESH
The main advantage of trading using opposite Central Industrial and FARM FRESH positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Central Industrial position performs unexpectedly, FARM FRESH 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 FARM FRESH will offset losses from the drop in FARM FRESH's long position.| Central Industrial vs. MClean Technologies Bhd | Central Industrial vs. Impiana Hotels Bhd | Central Industrial vs. Datasonic Group Bhd | Central Industrial vs. RHB Bank Bhd |
| FARM FRESH vs. Central Industrial Corp | FARM FRESH vs. Sports Toto Berhad | FARM FRESH vs. Mycron Steel Bhd | FARM FRESH vs. Choo Bee Metal |
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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
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