Correlation Between Dairy Farm and Northland Power
Can any of the company-specific risk be diversified away by investing in both Dairy Farm and Northland Power 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 Northland Power 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 Northland Power, you can compare the effects of market volatilities on Dairy Farm and Northland Power 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 Northland Power. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dairy Farm and Northland Power.
Diversification Opportunities for Dairy Farm and Northland Power
-0.54 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Dairy and Northland is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding Dairy Farm International and Northland Power in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Northland Power 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 Northland Power. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Northland Power has no effect on the direction of Dairy Farm i.e., Dairy Farm and Northland Power go up and down completely randomly.
Pair Corralation between Dairy Farm and Northland Power
Assuming the 90 days trading horizon Dairy Farm International is expected to generate 0.92 times more return on investment than Northland Power. However, Dairy Farm International is 1.08 times less risky than Northland Power. It trades about 0.0 of its potential returns per unit of risk. Northland Power is currently generating about -0.03 per unit of risk. If you would invest 252.00 in Dairy Farm International on September 14, 2024 and sell it today you would lose (34.00) from holding Dairy Farm International or give up 13.49% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dairy Farm International vs. Northland Power
Performance |
| Timeline |
| Dairy Farm International |
| Northland Power |
Dairy Farm and Northland Power Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Dairy Farm and Northland Power
The main advantage of trading using opposite Dairy Farm and Northland Power positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dairy Farm position performs unexpectedly, Northland Power 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 Northland Power will offset losses from the drop in Northland Power's long position.| Dairy Farm vs. TELES Informationstechnologien AG | Dairy Farm vs. CarsalesCom | Dairy Farm vs. CODERE ONLINE LUX | Dairy Farm vs. Pure Storage |
| Northland Power vs. Dairy Farm International | Northland Power vs. SIEM OFFSHORE NEW | Northland Power vs. Martin Marietta Materials | Northland Power vs. Rayonier Advanced Materials |
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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.
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