Correlation Between DAIRY FARM and American States
Can any of the company-specific risk be diversified away by investing in both DAIRY FARM and American States 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 American States 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 American States Water, you can compare the effects of market volatilities on DAIRY FARM and American States 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 American States. Check out your portfolio center. Please also check ongoing floating volatility patterns of DAIRY FARM and American States.
Diversification Opportunities for DAIRY FARM and American States
0.79 | Correlation Coefficient |
Poor diversification
The 3 months correlation between DAIRY and American is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding DAIRY FARM INTL and American States Water in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American States Water 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 American States. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American States Water has no effect on the direction of DAIRY FARM i.e., DAIRY FARM and American States go up and down completely randomly.
Pair Corralation between DAIRY FARM and American States
Assuming the 90 days trading horizon DAIRY FARM INTL is expected to generate 1.75 times more return on investment than American States. However, DAIRY FARM is 1.75 times more volatile than American States Water. It trades about 0.12 of its potential returns per unit of risk. American States Water is currently generating about 0.11 per unit of risk. If you would invest 172.00 in DAIRY FARM INTL on September 1, 2024 and sell it today you would earn a total of 62.00 from holding DAIRY FARM INTL or generate 36.05% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 99.24% |
| Values | Daily Returns |
DAIRY FARM INTL vs. American States Water
Performance |
| Timeline |
| DAIRY FARM INTL |
| American States Water |
DAIRY FARM and American States Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with DAIRY FARM and American States
The main advantage of trading using opposite DAIRY FARM and American States positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if DAIRY FARM position performs unexpectedly, American States 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 American States will offset losses from the drop in American States' long position.| DAIRY FARM vs. SIVERS SEMICONDUCTORS AB | DAIRY FARM vs. Darden Restaurants | DAIRY FARM vs. Reliance Steel Aluminum | DAIRY FARM vs. Q2M Managementberatung AG |
| American States vs. MYFAIR GOLD P | American States vs. Calibre Mining Corp | American States vs. DELTA AIR LINES | American States vs. VIVA WINE GROUP |
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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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