Correlation Between DAIRY FARM and Grand Canyon
Can any of the company-specific risk be diversified away by investing in both DAIRY FARM and Grand Canyon 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 Grand Canyon 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 Grand Canyon Education, you can compare the effects of market volatilities on DAIRY FARM and Grand Canyon 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 Grand Canyon. Check out your portfolio center. Please also check ongoing floating volatility patterns of DAIRY FARM and Grand Canyon.
Diversification Opportunities for DAIRY FARM and Grand Canyon
0.77 | Correlation Coefficient |
Poor diversification
The 3 months correlation between DAIRY and Grand is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding DAIRY FARM INTL and Grand Canyon Education in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Grand Canyon Education 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 Grand Canyon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Grand Canyon Education has no effect on the direction of DAIRY FARM i.e., DAIRY FARM and Grand Canyon go up and down completely randomly.
Pair Corralation between DAIRY FARM and Grand Canyon
Assuming the 90 days trading horizon DAIRY FARM INTL is expected to generate 0.85 times more return on investment than Grand Canyon. However, DAIRY FARM INTL is 1.18 times less risky than Grand Canyon. It trades about -0.09 of its potential returns per unit of risk. Grand Canyon Education is currently generating about -0.13 per unit of risk. If you would invest 222.00 in DAIRY FARM INTL on October 12, 2024 and sell it today you would lose (4.00) from holding DAIRY FARM INTL or give up 1.8% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 94.44% |
| Values | Daily Returns |
DAIRY FARM INTL vs. Grand Canyon Education
Performance |
| Timeline |
| DAIRY FARM INTL |
| Grand Canyon Education |
DAIRY FARM and Grand Canyon Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with DAIRY FARM and Grand Canyon
The main advantage of trading using opposite DAIRY FARM and Grand Canyon positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if DAIRY FARM position performs unexpectedly, Grand Canyon 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 Grand Canyon will offset losses from the drop in Grand Canyon's long position.The idea behind DAIRY FARM INTL and Grand Canyon Education 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.| Grand Canyon vs. Federal Agricultural Mortgage | Grand Canyon vs. Wyndham Hotels Resorts | Grand Canyon vs. PPHE HOTEL GROUP | Grand Canyon vs. DAIRY FARM INTL |
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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.
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