Correlation Between Farm Pride and Adairs
Can any of the company-specific risk be diversified away by investing in both Farm Pride and Adairs 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 Farm Pride and Adairs into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Farm Pride Foods and Adairs, you can compare the effects of market volatilities on Farm Pride and Adairs 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 Farm Pride with a short position of Adairs. Check out your portfolio center. Please also check ongoing floating volatility patterns of Farm Pride and Adairs.
Diversification Opportunities for Farm Pride and Adairs
0.38 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Farm and Adairs is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Farm Pride Foods and Adairs in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Adairs and Farm Pride 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 Farm Pride Foods are associated (or correlated) with Adairs. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Adairs has no effect on the direction of Farm Pride i.e., Farm Pride and Adairs go up and down completely randomly.
Pair Corralation between Farm Pride and Adairs
Assuming the 90 days trading horizon Farm Pride is expected to generate 6.19 times less return on investment than Adairs. In addition to that, Farm Pride is 1.66 times more volatile than Adairs. It trades about 0.03 of its total potential returns per unit of risk. Adairs is currently generating about 0.26 per unit of volatility. If you would invest 175.00 in Adairs on September 12, 2024 and sell it today you would earn a total of 106.00 from holding Adairs or generate 60.57% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 98.46% |
| Values | Daily Returns |
Farm Pride Foods vs. Adairs
Performance |
| Timeline |
| Farm Pride Foods |
| Adairs |
Farm Pride and Adairs Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Farm Pride and Adairs
The main advantage of trading using opposite Farm Pride and Adairs positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Farm Pride position performs unexpectedly, Adairs 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 Adairs will offset losses from the drop in Adairs' long position.| Farm Pride vs. Aneka Tambang Tbk | Farm Pride vs. Macquarie Group | Farm Pride vs. Macquarie Group Ltd | Farm Pride vs. Challenger |
| Adairs vs. Kip McGrath Education | Adairs vs. Platinum Asia Investments | Adairs vs. Ras Technology Holdings | Adairs vs. Carlton Investments |
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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.
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