Correlation Between Farm Pride and Cosmo Metals
Can any of the company-specific risk be diversified away by investing in both Farm Pride and Cosmo Metals 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 Cosmo Metals 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 Cosmo Metals, you can compare the effects of market volatilities on Farm Pride and Cosmo Metals 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 Cosmo Metals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Farm Pride and Cosmo Metals.
Diversification Opportunities for Farm Pride and Cosmo Metals
-0.17 | Correlation Coefficient |
Good diversification
The 3 months correlation between Farm and Cosmo is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding Farm Pride Foods and Cosmo Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cosmo Metals 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 Cosmo Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cosmo Metals has no effect on the direction of Farm Pride i.e., Farm Pride and Cosmo Metals go up and down completely randomly.
Pair Corralation between Farm Pride and Cosmo Metals
Assuming the 90 days trading horizon Farm Pride Foods is expected to generate 1.28 times more return on investment than Cosmo Metals. However, Farm Pride is 1.28 times more volatile than Cosmo Metals. It trades about 0.09 of its potential returns per unit of risk. Cosmo Metals is currently generating about -0.11 per unit of risk. If you would invest 9.40 in Farm Pride Foods on November 3, 2024 and sell it today you would earn a total of 5.60 from holding Farm Pride Foods or generate 59.57% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Farm Pride Foods vs. Cosmo Metals
Performance |
| Timeline |
| Farm Pride Foods |
| Cosmo Metals |
Farm Pride and Cosmo Metals Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Farm Pride and Cosmo Metals
The main advantage of trading using opposite Farm Pride and Cosmo Metals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Farm Pride position performs unexpectedly, Cosmo Metals 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 Cosmo Metals will offset losses from the drop in Cosmo Metals' long position.| Farm Pride vs. Dicker Data | Farm Pride vs. Carlton Investments | Farm Pride vs. K2 Asset Management | Farm Pride vs. Clime Investment Management |
| Cosmo Metals vs. Northern Star Resources | Cosmo Metals vs. Evolution Mining | Cosmo Metals vs. Bluescope Steel | Cosmo Metals vs. Sandfire Resources NL |
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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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