Correlation Between Dairy Farm and GEA GROUP
Can any of the company-specific risk be diversified away by investing in both Dairy Farm and GEA GROUP 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 GEA GROUP 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 GEA GROUP, you can compare the effects of market volatilities on Dairy Farm and GEA GROUP 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 GEA GROUP. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dairy Farm and GEA GROUP.
Diversification Opportunities for Dairy Farm and GEA GROUP
0.79 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Dairy and GEA is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Dairy Farm International and GEA GROUP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GEA GROUP 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 GEA GROUP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GEA GROUP has no effect on the direction of Dairy Farm i.e., Dairy Farm and GEA GROUP go up and down completely randomly.
Pair Corralation between Dairy Farm and GEA GROUP
Assuming the 90 days trading horizon Dairy Farm International is expected to generate 2.13 times more return on investment than GEA GROUP. However, Dairy Farm is 2.13 times more volatile than GEA GROUP. It trades about 0.17 of its potential returns per unit of risk. GEA GROUP is currently generating about 0.21 per unit of risk. If you would invest 214.00 in Dairy Farm International on September 4, 2024 and sell it today you would earn a total of 14.00 from holding Dairy Farm International or generate 6.54% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.45% |
| Values | Daily Returns |
Dairy Farm International vs. GEA GROUP
Performance |
| Timeline |
| Dairy Farm International |
| GEA GROUP |
Dairy Farm and GEA GROUP Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Dairy Farm and GEA GROUP
The main advantage of trading using opposite Dairy Farm and GEA GROUP positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dairy Farm position performs unexpectedly, GEA GROUP 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 GEA GROUP will offset losses from the drop in GEA GROUP's long position.| Dairy Farm vs. Seven i Holdings | Dairy Farm vs. AHOLD DELHAIADR16 EO 25 | Dairy Farm vs. Loblaw Companies Limited | Dairy Farm vs. TESCO PLC LS 0633333 |
| GEA GROUP vs. SIEMENS AG SP | GEA GROUP vs. Siemens Aktiengesellschaft | GEA GROUP vs. Siemens Aktiengesellschaft | GEA GROUP vs. Atlas Copco A |
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 Anywhere module to track or share privately all of your investments from the convenience of any device.
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