Correlation Between Iron Road and Farm Pride
Can any of the company-specific risk be diversified away by investing in both Iron Road and Farm Pride 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 Iron Road and Farm Pride into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Iron Road and Farm Pride Foods, you can compare the effects of market volatilities on Iron Road and Farm Pride 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 Iron Road with a short position of Farm Pride. Check out your portfolio center. Please also check ongoing floating volatility patterns of Iron Road and Farm Pride.
Diversification Opportunities for Iron Road and Farm Pride
-0.51 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Iron and Farm is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding Iron Road and Farm Pride Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Farm Pride Foods and Iron Road 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 Iron Road are associated (or correlated) with Farm Pride. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Farm Pride Foods has no effect on the direction of Iron Road i.e., Iron Road and Farm Pride go up and down completely randomly.
Pair Corralation between Iron Road and Farm Pride
Assuming the 90 days trading horizon Iron Road is expected to generate 68.75 times less return on investment than Farm Pride. But when comparing it to its historical volatility, Iron Road is 1.51 times less risky than Farm Pride. It trades about 0.0 of its potential returns per unit of risk. Farm Pride Foods is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest 15.00 in Farm Pride Foods on September 14, 2024 and sell it today you would lose (3.00) from holding Farm Pride Foods or give up 20.0% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Iron Road vs. Farm Pride Foods
Performance |
| Timeline |
| Iron Road |
| Farm Pride Foods |
Iron Road and Farm Pride Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Iron Road and Farm Pride
The main advantage of trading using opposite Iron Road and Farm Pride positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Iron Road position performs unexpectedly, Farm Pride 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 Farm Pride will offset losses from the drop in Farm Pride's long position.| Iron Road vs. Northern Star Resources | Iron Road vs. Evolution Mining | Iron Road vs. Bluescope Steel | Iron Road vs. Sandfire Resources NL |
| Farm Pride vs. Aneka Tambang Tbk | Farm Pride vs. Macquarie Group | Farm Pride vs. Macquarie Group Ltd | Farm Pride vs. Challenger |
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 Stocks Directory module to find actively traded stocks across global markets.
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