Correlation Between Forafric Global and Chaoda Modern
Can any of the company-specific risk be diversified away by investing in both Forafric Global and Chaoda Modern 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 Forafric Global and Chaoda Modern into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Forafric Global PLC and Chaoda Modern Agriculture, you can compare the effects of market volatilities on Forafric Global and Chaoda Modern 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 Forafric Global with a short position of Chaoda Modern. Check out your portfolio center. Please also check ongoing floating volatility patterns of Forafric Global and Chaoda Modern.
Diversification Opportunities for Forafric Global and Chaoda Modern
0.55 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Forafric and Chaoda is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Forafric Global PLC and Chaoda Modern Agriculture in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chaoda Modern Agriculture and Forafric Global 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 Forafric Global PLC are associated (or correlated) with Chaoda Modern. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chaoda Modern Agriculture has no effect on the direction of Forafric Global i.e., Forafric Global and Chaoda Modern go up and down completely randomly.
Pair Corralation between Forafric Global and Chaoda Modern
Given the investment horizon of 90 days Forafric Global PLC is expected to under-perform the Chaoda Modern. But the stock apears to be less risky and, when comparing its historical volatility, Forafric Global PLC is 73.46 times less risky than Chaoda Modern. The stock trades about -0.11 of its potential returns per unit of risk. The Chaoda Modern Agriculture is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest 0.04 in Chaoda Modern Agriculture on August 30, 2024 and sell it today you would earn a total of 0.16 from holding Chaoda Modern Agriculture or generate 400.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 95.65% |
| Values | Daily Returns |
Forafric Global PLC vs. Chaoda Modern Agriculture
Performance |
| Timeline |
| Forafric Global PLC |
| Chaoda Modern Agriculture |
Forafric Global and Chaoda Modern Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Forafric Global and Chaoda Modern
The main advantage of trading using opposite Forafric Global and Chaoda Modern positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Forafric Global position performs unexpectedly, Chaoda Modern 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 Chaoda Modern will offset losses from the drop in Chaoda Modern's long position.| Forafric Global vs. Forafric Global PLC | Forafric Global vs. GrainCorp Limited | Forafric Global vs. Australian Agricultural | Forafric Global vs. Fresh Del Monte |
| Chaoda Modern vs. Wilmar International | Chaoda Modern vs. SLC Agricola SA | Chaoda Modern vs. Brasilagro Adr | Chaoda Modern vs. Alico Inc |
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 Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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