Correlation Between DAIRY FARM and ALEFARM BREWING
Can any of the company-specific risk be diversified away by investing in both DAIRY FARM and ALEFARM BREWING 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 ALEFARM BREWING into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between DAIRY FARM INTL and ALEFARM BREWING DK 05, you can compare the effects of market volatilities on DAIRY FARM and ALEFARM BREWING 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 ALEFARM BREWING. Check out your portfolio center. Please also check ongoing floating volatility patterns of DAIRY FARM and ALEFARM BREWING.
Diversification Opportunities for DAIRY FARM and ALEFARM BREWING
-0.31 | Correlation Coefficient |
Very good diversification
The 3 months correlation between DAIRY and ALEFARM is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding DAIRY FARM INTL and ALEFARM BREWING DK 05 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ALEFARM BREWING DK 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 INTL are associated (or correlated) with ALEFARM BREWING. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ALEFARM BREWING DK has no effect on the direction of DAIRY FARM i.e., DAIRY FARM and ALEFARM BREWING go up and down completely randomly.
Pair Corralation between DAIRY FARM and ALEFARM BREWING
Assuming the 90 days trading horizon DAIRY FARM INTL is expected to generate 0.51 times more return on investment than ALEFARM BREWING. However, DAIRY FARM INTL is 1.97 times less risky than ALEFARM BREWING. It trades about 0.23 of its potential returns per unit of risk. ALEFARM BREWING DK 05 is currently generating about -0.03 per unit of risk. If you would invest 159.00 in DAIRY FARM INTL on September 12, 2024 and sell it today you would earn a total of 63.00 from holding DAIRY FARM INTL or generate 39.62% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
DAIRY FARM INTL vs. ALEFARM BREWING DK 05
Performance |
| Timeline |
| DAIRY FARM INTL |
| ALEFARM BREWING DK |
DAIRY FARM and ALEFARM BREWING Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with DAIRY FARM and ALEFARM BREWING
The main advantage of trading using opposite DAIRY FARM and ALEFARM BREWING positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if DAIRY FARM position performs unexpectedly, ALEFARM BREWING 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 ALEFARM BREWING will offset losses from the drop in ALEFARM BREWING's long position.The idea behind DAIRY FARM INTL and ALEFARM BREWING DK 05 pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| ALEFARM BREWING vs. Corporate Travel Management | ALEFARM BREWING vs. Sumitomo Rubber Industries | ALEFARM BREWING vs. SANOK RUBBER ZY | ALEFARM BREWING vs. Jupiter Fund Management |
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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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