Correlation Between Dairy Farm and HYDROFARM HLD
Can any of the company-specific risk be diversified away by investing in both Dairy Farm and HYDROFARM HLD 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 HYDROFARM HLD 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 HYDROFARM HLD GRP, you can compare the effects of market volatilities on Dairy Farm and HYDROFARM HLD 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 HYDROFARM HLD. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dairy Farm and HYDROFARM HLD.
Diversification Opportunities for Dairy Farm and HYDROFARM HLD
0.23 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Dairy and HYDROFARM is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Dairy Farm International and HYDROFARM HLD GRP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HYDROFARM HLD GRP 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 HYDROFARM HLD. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HYDROFARM HLD GRP has no effect on the direction of Dairy Farm i.e., Dairy Farm and HYDROFARM HLD go up and down completely randomly.
Pair Corralation between Dairy Farm and HYDROFARM HLD
Assuming the 90 days trading horizon Dairy Farm International is expected to generate 0.73 times more return on investment than HYDROFARM HLD. However, Dairy Farm International is 1.37 times less risky than HYDROFARM HLD. It trades about 0.1 of its potential returns per unit of risk. HYDROFARM HLD GRP is currently generating about 0.03 per unit of risk. If you would invest 167.00 in Dairy Farm International on August 31, 2024 and sell it today you would earn a total of 63.00 from holding Dairy Farm International or generate 37.72% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dairy Farm International vs. HYDROFARM HLD GRP
Performance |
| Timeline |
| Dairy Farm International |
| HYDROFARM HLD GRP |
Dairy Farm and HYDROFARM HLD Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Dairy Farm and HYDROFARM HLD
The main advantage of trading using opposite Dairy Farm and HYDROFARM HLD positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dairy Farm position performs unexpectedly, HYDROFARM HLD 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 HYDROFARM HLD will offset losses from the drop in HYDROFARM HLD's long position.| Dairy Farm vs. TESCO PLC LS 0633333 | Dairy Farm vs. Superior Plus Corp | Dairy Farm vs. NMI Holdings | Dairy Farm vs. Origin Agritech |
| HYDROFARM HLD vs. Sunstone Hotel Investors | HYDROFARM HLD vs. Wyndham Hotels Resorts | HYDROFARM HLD vs. Playa Hotels Resorts | HYDROFARM HLD vs. DALATA HOTEL |
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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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