Correlation Between Dairy Farm and Associated British
Can any of the company-specific risk be diversified away by investing in both Dairy Farm and Associated British 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 Associated British 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 Associated British Foods, you can compare the effects of market volatilities on Dairy Farm and Associated British 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 Associated British. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dairy Farm and Associated British.
Diversification Opportunities for Dairy Farm and Associated British
-0.22 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Dairy and Associated is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding Dairy Farm International and Associated British Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Associated British Foods 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 Associated British. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Associated British Foods has no effect on the direction of Dairy Farm i.e., Dairy Farm and Associated British go up and down completely randomly.
Pair Corralation between Dairy Farm and Associated British
Assuming the 90 days trading horizon Dairy Farm International is expected to under-perform the Associated British. In addition to that, Dairy Farm is 1.59 times more volatile than Associated British Foods. It trades about -0.11 of its total potential returns per unit of risk. Associated British Foods is currently generating about 0.02 per unit of volatility. If you would invest 2,550 in Associated British Foods on September 20, 2024 and sell it today you would earn a total of 7.00 from holding Associated British Foods or generate 0.27% 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. Associated British Foods
Performance |
| Timeline |
| Dairy Farm International |
| Associated British Foods |
Dairy Farm and Associated British Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Dairy Farm and Associated British
The main advantage of trading using opposite Dairy Farm and Associated British positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dairy Farm position performs unexpectedly, Associated British 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 Associated British will offset losses from the drop in Associated British's long position.| Dairy Farm vs. Loblaw Companies Limited | Dairy Farm vs. Superior Plus Corp | Dairy Farm vs. SIVERS SEMICONDUCTORS AB | Dairy Farm vs. Norsk Hydro ASA |
| Associated British vs. CyberArk Software | Associated British vs. EHEALTH | Associated British vs. YOOMA WELLNESS INC | Associated British vs. ATRYS HEALTH SA |
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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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