Correlation Between Dairy Farm and SBM OFFSHORE
Can any of the company-specific risk be diversified away by investing in both Dairy Farm and SBM OFFSHORE 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 SBM OFFSHORE 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 SBM OFFSHORE, you can compare the effects of market volatilities on Dairy Farm and SBM OFFSHORE 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 SBM OFFSHORE. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dairy Farm and SBM OFFSHORE.
Diversification Opportunities for Dairy Farm and SBM OFFSHORE
0.7 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Dairy and SBM is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Dairy Farm International and SBM OFFSHORE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SBM OFFSHORE 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 SBM OFFSHORE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SBM OFFSHORE has no effect on the direction of Dairy Farm i.e., Dairy Farm and SBM OFFSHORE go up and down completely randomly.
Pair Corralation between Dairy Farm and SBM OFFSHORE
Assuming the 90 days trading horizon Dairy Farm is expected to generate 1.88 times less return on investment than SBM OFFSHORE. In addition to that, Dairy Farm is 1.67 times more volatile than SBM OFFSHORE. It trades about 0.03 of its total potential returns per unit of risk. SBM OFFSHORE is currently generating about 0.09 per unit of volatility. If you would invest 1,159 in SBM OFFSHORE on September 14, 2024 and sell it today you would earn a total of 507.00 from holding SBM OFFSHORE or generate 43.74% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 99.64% |
| Values | Daily Returns |
Dairy Farm International vs. SBM OFFSHORE
Performance |
| Timeline |
| Dairy Farm International |
| SBM OFFSHORE |
Dairy Farm and SBM OFFSHORE Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Dairy Farm and SBM OFFSHORE
The main advantage of trading using opposite Dairy Farm and SBM OFFSHORE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dairy Farm position performs unexpectedly, SBM OFFSHORE 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 SBM OFFSHORE will offset losses from the drop in SBM OFFSHORE's long position.| Dairy Farm vs. TELES Informationstechnologien AG | Dairy Farm vs. CarsalesCom | Dairy Farm vs. CODERE ONLINE LUX | Dairy Farm vs. Pure Storage |
| SBM OFFSHORE vs. Apple Inc | SBM OFFSHORE vs. Apple Inc | SBM OFFSHORE vs. Apple Inc | SBM OFFSHORE vs. Apple Inc |
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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.
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