Correlation Between Dairy Farm and New Residential
Can any of the company-specific risk be diversified away by investing in both Dairy Farm and New Residential 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 Dairy Farm and New Residential into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Dairy Farm International and New Residential Investment, you can compare the effects of market volatilities on Dairy Farm and New Residential 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 Dairy Farm with a short position of New Residential. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dairy Farm and New Residential.
Diversification Opportunities for Dairy Farm and New Residential
0.56 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Dairy and New is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Dairy Farm International and New Residential Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on New Residential Inve and Dairy Farm 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 Dairy Farm International are associated (or correlated) with New Residential. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of New Residential Inve has no effect on the direction of Dairy Farm i.e., Dairy Farm and New Residential go up and down completely randomly.
Pair Corralation between Dairy Farm and New Residential
Assuming the 90 days trading horizon Dairy Farm International is expected to under-perform the New Residential. In addition to that, Dairy Farm is 1.96 times more volatile than New Residential Investment. It trades about -0.01 of its total potential returns per unit of risk. New Residential Investment is currently generating about 0.07 per unit of volatility. If you would invest 706.00 in New Residential Investment on September 28, 2024 and sell it today you would earn a total of 339.00 from holding New Residential Investment or generate 48.02% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dairy Farm International vs. New Residential Investment
Performance |
| Timeline |
| Dairy Farm International |
| New Residential Inve |
Dairy Farm and New Residential Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Dairy Farm and New Residential
The main advantage of trading using opposite Dairy Farm and New Residential positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dairy Farm position performs unexpectedly, New Residential 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 New Residential will offset losses from the drop in New Residential's long position.| Dairy Farm vs. Geely Automobile Holdings | Dairy Farm vs. GEELY AUTOMOBILE | Dairy Farm vs. Addus HomeCare | Dairy Farm vs. Tri Pointe Homes |
| New Residential vs. Gentex | New Residential vs. Eaton PLC | New Residential vs. ImagineAR | New Residential vs. Nokia |
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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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