Correlation Between Dairy Farm and CarsalesCom
Can any of the company-specific risk be diversified away by investing in both Dairy Farm and CarsalesCom 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 CarsalesCom 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 CarsalesCom, you can compare the effects of market volatilities on Dairy Farm and CarsalesCom 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 CarsalesCom. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dairy Farm and CarsalesCom.
Diversification Opportunities for Dairy Farm and CarsalesCom
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Dairy and CarsalesCom is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Dairy Farm International and CarsalesCom in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CarsalesCom 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 CarsalesCom. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CarsalesCom has no effect on the direction of Dairy Farm i.e., Dairy Farm and CarsalesCom go up and down completely randomly.
Pair Corralation between Dairy Farm and CarsalesCom
Assuming the 90 days trading horizon Dairy Farm is expected to generate 1.43 times less return on investment than CarsalesCom. In addition to that, Dairy Farm is 1.4 times more volatile than CarsalesCom. It trades about 0.24 of its total potential returns per unit of risk. CarsalesCom is currently generating about 0.48 per unit of volatility. If you would invest 2,240 in CarsalesCom on September 1, 2024 and sell it today you would earn a total of 320.00 from holding CarsalesCom or generate 14.29% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dairy Farm International vs. CarsalesCom
Performance |
| Timeline |
| Dairy Farm International |
| CarsalesCom |
Dairy Farm and CarsalesCom Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Dairy Farm and CarsalesCom
The main advantage of trading using opposite Dairy Farm and CarsalesCom positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dairy Farm position performs unexpectedly, CarsalesCom 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 CarsalesCom will offset losses from the drop in CarsalesCom's long position.| Dairy Farm vs. TESCO PLC LS 0633333 | Dairy Farm vs. Superior Plus Corp | Dairy Farm vs. NMI Holdings | Dairy Farm vs. Origin Agritech |
| CarsalesCom vs. Alphabet Class A | CarsalesCom vs. Alphabet Class A | CarsalesCom vs. Meta Platforms | CarsalesCom vs. Tencent Holdings |
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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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