Correlation Between Associated British and Dairy Farm
Can any of the company-specific risk be diversified away by investing in both Associated British and Dairy Farm 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 Associated British and Dairy Farm into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Associated British Foods and Dairy Farm International, you can compare the effects of market volatilities on Associated British and Dairy Farm 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 Associated British with a short position of Dairy Farm. Check out your portfolio center. Please also check ongoing floating volatility patterns of Associated British and Dairy Farm.
Diversification Opportunities for Associated British and Dairy Farm
-0.38 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Associated and Dairy is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding Associated British Foods and Dairy Farm International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dairy Farm International and Associated British 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 Associated British Foods are associated (or correlated) with Dairy Farm. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dairy Farm International has no effect on the direction of Associated British i.e., Associated British and Dairy Farm go up and down completely randomly.
Pair Corralation between Associated British and Dairy Farm
Assuming the 90 days trading horizon Associated British Foods is expected to generate 0.63 times more return on investment than Dairy Farm. However, Associated British Foods is 1.6 times less risky than Dairy Farm. It trades about -0.21 of its potential returns per unit of risk. Dairy Farm International is currently generating about -0.18 per unit of risk. If you would invest 2,625 in Associated British Foods on September 24, 2024 and sell it today you would lose (150.00) from holding Associated British Foods or give up 5.71% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 95.45% |
| Values | Daily Returns |
Associated British Foods vs. Dairy Farm International
Performance |
| Timeline |
| Associated British Foods |
| Dairy Farm International |
Associated British and Dairy Farm Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Associated British and Dairy Farm
The main advantage of trading using opposite Associated British and Dairy Farm positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Associated British position performs unexpectedly, Dairy Farm 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 Dairy Farm will offset losses from the drop in Dairy Farm's long position.| Associated British vs. United Rentals | Associated British vs. ALBIS LEASING AG | Associated British vs. ON SEMICONDUCTOR | Associated British vs. Tower Semiconductor |
| Dairy Farm vs. Universal Display | Dairy Farm vs. PLAYTIKA HOLDING DL 01 | Dairy Farm vs. ANTA SPORTS PRODUCT | Dairy Farm vs. Transportadora de Gas |
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 Anywhere module to track or share privately all of your investments from the convenience of any device.
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