Correlation Between Farm Pride and Aeris Environmental
Can any of the company-specific risk be diversified away by investing in both Farm Pride and Aeris Environmental 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 Aeris Environmental 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 Aeris Environmental, you can compare the effects of market volatilities on Farm Pride and Aeris Environmental 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 Aeris Environmental. Check out your portfolio center. Please also check ongoing floating volatility patterns of Farm Pride and Aeris Environmental.
Diversification Opportunities for Farm Pride and Aeris Environmental
0.13 | Correlation Coefficient |
Average diversification
The 3 months correlation between Farm and Aeris is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding Farm Pride Foods and Aeris Environmental in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aeris Environmental 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 Aeris Environmental. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aeris Environmental has no effect on the direction of Farm Pride i.e., Farm Pride and Aeris Environmental go up and down completely randomly.
Pair Corralation between Farm Pride and Aeris Environmental
Assuming the 90 days trading horizon Farm Pride Foods is expected to under-perform the Aeris Environmental. In addition to that, Farm Pride is 1.41 times more volatile than Aeris Environmental. It trades about -0.01 of its total potential returns per unit of risk. Aeris Environmental is currently generating about 0.1 per unit of volatility. If you would invest 4.00 in Aeris Environmental on September 20, 2024 and sell it today you would earn a total of 4.50 from holding Aeris Environmental or generate 112.5% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Farm Pride Foods vs. Aeris Environmental
Performance |
| Timeline |
| Farm Pride Foods |
| Aeris Environmental |
Farm Pride and Aeris Environmental Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Farm Pride and Aeris Environmental
The main advantage of trading using opposite Farm Pride and Aeris Environmental positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Farm Pride position performs unexpectedly, Aeris Environmental 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 Aeris Environmental will offset losses from the drop in Aeris Environmental's long position.| Farm Pride vs. Premier Investments | Farm Pride vs. Mirrabooka Investments | Farm Pride vs. Retail Food Group | Farm Pride vs. Queste Communications |
| Aeris Environmental vs. Iron Road | Aeris Environmental vs. Duxton Broadacre Farms | Aeris Environmental vs. Dexus Convenience Retail | Aeris Environmental vs. Farm Pride Foods |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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