Correlation Between Dairy Farm and POWER METALS
Can any of the company-specific risk be diversified away by investing in both Dairy Farm and POWER METALS 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 POWER METALS 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 POWER METALS, you can compare the effects of market volatilities on Dairy Farm and POWER METALS 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 POWER METALS. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dairy Farm and POWER METALS.
Diversification Opportunities for Dairy Farm and POWER METALS
0.64 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Dairy and POWER is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Dairy Farm International and POWER METALS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on POWER METALS 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 POWER METALS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of POWER METALS has no effect on the direction of Dairy Farm i.e., Dairy Farm and POWER METALS go up and down completely randomly.
Pair Corralation between Dairy Farm and POWER METALS
Assuming the 90 days trading horizon Dairy Farm International is expected to under-perform the POWER METALS. But the stock apears to be less risky and, when comparing its historical volatility, Dairy Farm International is 1.75 times less risky than POWER METALS. The stock trades about -0.01 of its potential returns per unit of risk. The POWER METALS is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 28.00 in POWER METALS on September 15, 2024 and sell it today you would earn a total of 2.00 from holding POWER METALS or generate 7.14% 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. POWER METALS
Performance |
| Timeline |
| Dairy Farm International |
| POWER METALS |
Dairy Farm and POWER METALS Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Dairy Farm and POWER METALS
The main advantage of trading using opposite Dairy Farm and POWER METALS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dairy Farm position performs unexpectedly, POWER METALS 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 POWER METALS will offset losses from the drop in POWER METALS's long position.| Dairy Farm vs. Q2M Managementberatung AG | Dairy Farm vs. Coor Service Management | Dairy Farm vs. Ares Management Corp | Dairy Farm vs. Air New Zealand |
| POWER METALS vs. MCEWEN MINING INC | POWER METALS vs. GRIFFIN MINING LTD | POWER METALS vs. Evolution Mining Limited | POWER METALS vs. Internet Thailand PCL |
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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.
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