Correlation Between Dairy Farm and MOLSON RS
Can any of the company-specific risk be diversified away by investing in both Dairy Farm and MOLSON RS 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 MOLSON RS 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 MOLSON RS CDA, you can compare the effects of market volatilities on Dairy Farm and MOLSON RS 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 MOLSON RS. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dairy Farm and MOLSON RS.
Diversification Opportunities for Dairy Farm and MOLSON RS
0.76 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Dairy and MOLSON is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Dairy Farm International and MOLSON RS CDA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MOLSON RS CDA 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 MOLSON RS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MOLSON RS CDA has no effect on the direction of Dairy Farm i.e., Dairy Farm and MOLSON RS go up and down completely randomly.
Pair Corralation between Dairy Farm and MOLSON RS
Assuming the 90 days trading horizon Dairy Farm International is expected to generate 1.67 times more return on investment than MOLSON RS. However, Dairy Farm is 1.67 times more volatile than MOLSON RS CDA. It trades about 0.09 of its potential returns per unit of risk. MOLSON RS CDA is currently generating about 0.06 per unit of risk. If you would invest 164.00 in Dairy Farm International on September 3, 2024 and sell it today you would earn a total of 64.00 from holding Dairy Farm International or generate 39.02% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dairy Farm International vs. MOLSON RS CDA
Performance |
| Timeline |
| Dairy Farm International |
| MOLSON RS CDA |
Dairy Farm and MOLSON RS Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Dairy Farm and MOLSON RS
The main advantage of trading using opposite Dairy Farm and MOLSON RS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dairy Farm position performs unexpectedly, MOLSON RS 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 MOLSON RS will offset losses from the drop in MOLSON RS's long position.| Dairy Farm vs. BRIT AMER TOBACCO | Dairy Farm vs. Pentair plc | Dairy Farm vs. IMPERIAL TOBACCO | Dairy Farm vs. Alaska Air Group |
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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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