Correlation Between Farm Pride and CSL
Can any of the company-specific risk be diversified away by investing in both Farm Pride and CSL 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 CSL 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 CSL, you can compare the effects of market volatilities on Farm Pride and CSL 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 CSL. Check out your portfolio center. Please also check ongoing floating volatility patterns of Farm Pride and CSL.
Diversification Opportunities for Farm Pride and CSL
-0.41 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Farm and CSL is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding Farm Pride Foods and CSL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CSL 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 CSL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CSL has no effect on the direction of Farm Pride i.e., Farm Pride and CSL go up and down completely randomly.
Pair Corralation between Farm Pride and CSL
Assuming the 90 days trading horizon Farm Pride Foods is expected to generate 5.03 times more return on investment than CSL. However, Farm Pride is 5.03 times more volatile than CSL. It trades about 0.05 of its potential returns per unit of risk. CSL is currently generating about -0.02 per unit of risk. If you would invest 10.00 in Farm Pride Foods on September 15, 2024 and sell it today you would earn a total of 2.00 from holding Farm Pride Foods or generate 20.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Farm Pride Foods vs. CSL
Performance |
| Timeline |
| Farm Pride Foods |
| CSL |
Farm Pride and CSL Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Farm Pride and CSL
The main advantage of trading using opposite Farm Pride and CSL positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Farm Pride position performs unexpectedly, CSL 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 CSL will offset losses from the drop in CSL's long position.| Farm Pride vs. ARN Media Limited | Farm Pride vs. Premier Investments | Farm Pride vs. BKI Investment | Farm Pride vs. Garda Diversified Ppty |
| CSL vs. Dicker Data | CSL vs. Hudson Investment Group | CSL vs. Carlton Investments | CSL vs. K2 Asset Management |
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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
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