Correlation Between Jeudan and First Farms
Can any of the company-specific risk be diversified away by investing in both Jeudan and First Farms 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 Jeudan and First Farms into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Jeudan and First Farms AS, you can compare the effects of market volatilities on Jeudan and First Farms 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 Jeudan with a short position of First Farms. Check out your portfolio center. Please also check ongoing floating volatility patterns of Jeudan and First Farms.
Diversification Opportunities for Jeudan and First Farms
0.54 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Jeudan and First is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Jeudan and First Farms AS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Farms AS and Jeudan 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 Jeudan are associated (or correlated) with First Farms. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Farms AS has no effect on the direction of Jeudan i.e., Jeudan and First Farms go up and down completely randomly.
Pair Corralation between Jeudan and First Farms
Assuming the 90 days trading horizon Jeudan is expected to under-perform the First Farms. In addition to that, Jeudan is 1.31 times more volatile than First Farms AS. It trades about -0.02 of its total potential returns per unit of risk. First Farms AS is currently generating about 0.0 per unit of volatility. If you would invest 7,932 in First Farms AS on November 5, 2024 and sell it today you would lose (752.00) from holding First Farms AS or give up 9.48% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 99.8% |
| Values | Daily Returns |
Jeudan vs. First Farms AS
Performance |
| Timeline |
| Jeudan |
| First Farms AS |
Jeudan and First Farms Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Jeudan and First Farms
The main advantage of trading using opposite Jeudan and First Farms positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Jeudan position performs unexpectedly, First Farms 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 First Farms will offset losses from the drop in First Farms' long position.The idea behind Jeudan and First Farms AS pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| First Farms vs. HH International AS | First Farms vs. SKAKO AS | First Farms vs. Spar Nord Bank | First Farms vs. Matas AS |
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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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