Correlation Between Sky Metals and Farm Pride
Can any of the company-specific risk be diversified away by investing in both Sky Metals 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 Sky Metals and Farm Pride into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Sky Metals and Farm Pride Foods, you can compare the effects of market volatilities on Sky Metals 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 Sky Metals with a short position of Farm Pride. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sky Metals and Farm Pride.
Diversification Opportunities for Sky Metals and Farm Pride
-0.4 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Sky and Farm is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding Sky Metals 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 Sky Metals 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 Sky Metals 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 Sky Metals i.e., Sky Metals and Farm Pride go up and down completely randomly.
Pair Corralation between Sky Metals and Farm Pride
Assuming the 90 days trading horizon Sky Metals is expected to generate 1.61 times less return on investment than Farm Pride. But when comparing it to its historical volatility, Sky Metals is 1.08 times less risky than Farm Pride. It trades about 0.03 of its potential returns per unit of risk. Farm Pride Foods is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 10.00 in Farm Pride Foods on October 30, 2024 and sell it today you would earn a total of 4.00 from holding Farm Pride Foods or generate 40.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 96.79% |
| Values | Daily Returns |
Sky Metals vs. Farm Pride Foods
Performance |
| Timeline |
| Sky Metals |
| Farm Pride Foods |
Sky Metals and Farm Pride Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sky Metals and Farm Pride
The main advantage of trading using opposite Sky Metals and Farm Pride positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sky Metals 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.| Sky Metals vs. Dug Technology | Sky Metals vs. Aussie Broadband | Sky Metals vs. Argo Investments | Sky Metals vs. BKI Investment |
| Farm Pride vs. Accent Resources NL | Farm Pride vs. Hutchison Telecommunications | Farm Pride vs. Energy Resources | Farm Pride vs. GO2 People |
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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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