Correlation Between Dairy Farm and AUTO TRADER
Can any of the company-specific risk be diversified away by investing in both Dairy Farm and AUTO TRADER 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 AUTO TRADER 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 AUTO TRADER ADR, you can compare the effects of market volatilities on Dairy Farm and AUTO TRADER 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 AUTO TRADER. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dairy Farm and AUTO TRADER.
Diversification Opportunities for Dairy Farm and AUTO TRADER
-0.34 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Dairy and AUTO is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding Dairy Farm International and AUTO TRADER ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AUTO TRADER ADR 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 AUTO TRADER. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AUTO TRADER ADR has no effect on the direction of Dairy Farm i.e., Dairy Farm and AUTO TRADER go up and down completely randomly.
Pair Corralation between Dairy Farm and AUTO TRADER
Assuming the 90 days trading horizon Dairy Farm International is expected to under-perform the AUTO TRADER. In addition to that, Dairy Farm is 1.54 times more volatile than AUTO TRADER ADR. It trades about -0.01 of its total potential returns per unit of risk. AUTO TRADER ADR is currently generating about 0.05 per unit of volatility. If you would invest 165.00 in AUTO TRADER ADR on October 23, 2024 and sell it today you would earn a total of 67.00 from holding AUTO TRADER ADR or generate 40.61% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dairy Farm International vs. AUTO TRADER ADR
Performance |
| Timeline |
| Dairy Farm International |
| AUTO TRADER ADR |
Dairy Farm and AUTO TRADER Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Dairy Farm and AUTO TRADER
The main advantage of trading using opposite Dairy Farm and AUTO TRADER positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dairy Farm position performs unexpectedly, AUTO TRADER 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 AUTO TRADER will offset losses from the drop in AUTO TRADER's long position.| Dairy Farm vs. United Airlines Holdings | Dairy Farm vs. JAPAN TOBACCO UNSPADR12 | Dairy Farm vs. Forsys Metals Corp | Dairy Farm vs. Harmony Gold Mining |
| AUTO TRADER vs. Hanison Construction Holdings | AUTO TRADER vs. Australian Agricultural | AUTO TRADER vs. GRIFFIN MINING LTD | AUTO TRADER vs. Dairy Farm International |
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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
Other Complementary Tools
| Portfolio Diagnostics Use generated alerts and portfolio events aggregator to diagnose current holdings | |
| Volatility Analysis Get historical volatility and risk analysis based on latest market data | |
| My Watchlist Analysis Analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like | |
| Portfolio Optimization Compute new portfolio that will generate highest expected return given your specified tolerance for risk | |
| Price Ceiling Movement Calculate and plot Price Ceiling Movement for different equity instruments |