Correlation Between Dairy Farm and Chongqing Machinery
Can any of the company-specific risk be diversified away by investing in both Dairy Farm and Chongqing Machinery 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 Chongqing Machinery 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 Chongqing Machinery Electric, you can compare the effects of market volatilities on Dairy Farm and Chongqing Machinery 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 Chongqing Machinery. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dairy Farm and Chongqing Machinery.
Diversification Opportunities for Dairy Farm and Chongqing Machinery
-0.03 | Correlation Coefficient |
Good diversification
The 3 months correlation between Dairy and Chongqing is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding Dairy Farm International and Chongqing Machinery Electric in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chongqing Machinery 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 Chongqing Machinery. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chongqing Machinery has no effect on the direction of Dairy Farm i.e., Dairy Farm and Chongqing Machinery go up and down completely randomly.
Pair Corralation between Dairy Farm and Chongqing Machinery
Assuming the 90 days trading horizon Dairy Farm International is expected to under-perform the Chongqing Machinery. But the stock apears to be less risky and, when comparing its historical volatility, Dairy Farm International is 4.03 times less risky than Chongqing Machinery. The stock trades about -0.08 of its potential returns per unit of risk. The Chongqing Machinery Electric is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest 8.40 in Chongqing Machinery Electric on November 3, 2024 and sell it today you would lose (0.95) from holding Chongqing Machinery Electric or give up 11.31% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dairy Farm International vs. Chongqing Machinery Electric
Performance |
| Timeline |
| Dairy Farm International |
| Chongqing Machinery |
Dairy Farm and Chongqing Machinery Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Dairy Farm and Chongqing Machinery
The main advantage of trading using opposite Dairy Farm and Chongqing Machinery positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dairy Farm position performs unexpectedly, Chongqing Machinery 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 Chongqing Machinery will offset losses from the drop in Chongqing Machinery's long position.| Dairy Farm vs. SEI INVESTMENTS | Dairy Farm vs. CAL MAINE FOODS | Dairy Farm vs. DIVERSIFIED ROYALTY | Dairy Farm vs. Fevertree Drinks PLC |
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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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.
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