Correlation Between Retail Food and Farm Pride
Can any of the company-specific risk be diversified away by investing in both Retail Food 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 Retail Food and Farm Pride into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Retail Food Group and Farm Pride Foods, you can compare the effects of market volatilities on Retail Food 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 Retail Food with a short position of Farm Pride. Check out your portfolio center. Please also check ongoing floating volatility patterns of Retail Food and Farm Pride.
Diversification Opportunities for Retail Food and Farm Pride
0.42 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Retail and Farm is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Retail Food Group 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 Retail Food 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 Retail Food Group 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 Retail Food i.e., Retail Food and Farm Pride go up and down completely randomly.
Pair Corralation between Retail Food and Farm Pride
Assuming the 90 days trading horizon Retail Food is expected to generate 11.4 times less return on investment than Farm Pride. But when comparing it to its historical volatility, Retail Food Group is 1.68 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 0.03 of returns per unit of risk over similar time horizon. If you would invest 9.61 in Farm Pride Foods on September 20, 2024 and sell it today you would earn a total of 1.39 from holding Farm Pride Foods or generate 14.46% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Retail Food Group vs. Farm Pride Foods
Performance |
| Timeline |
| Retail Food Group |
| Farm Pride Foods |
Retail Food and Farm Pride Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Retail Food and Farm Pride
The main advantage of trading using opposite Retail Food and Farm Pride positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Retail Food 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.| Retail Food vs. Magellan Financial Group | Retail Food vs. Macquarie Bank Limited | Retail Food vs. Bell Financial Group | Retail Food vs. Thorney Technologies |
| Farm Pride vs. Premier Investments | Farm Pride vs. Mirrabooka Investments | Farm Pride vs. Retail Food Group | Farm Pride vs. Queste Communications |
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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.
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