Correlation Between ES Ceramics and Farm Price

Can any of the company-specific risk be diversified away by investing in both ES Ceramics and Farm Price 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 ES Ceramics and Farm Price into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between ES Ceramics Technology and Farm Price Holdings, you can compare the effects of market volatilities on ES Ceramics and Farm Price 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 ES Ceramics with a short position of Farm Price. Check out your portfolio center. Please also check ongoing floating volatility patterns of ES Ceramics and Farm Price.

Diversification Opportunities for ES Ceramics and Farm Price

-0.05

Correlation Coefficient

ES Ceramics  Farm Price

Good diversification

The 3 months correlation between 0100 and Farm is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding ES Ceramics Technology and Farm Price Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Farm Price Holdings and ES Ceramics 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 ES Ceramics Technology are associated (or correlated) with Farm Price. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Farm Price Holdings has no effect on the direction of ES Ceramics i.e., ES Ceramics and Farm Price go up and down completely randomly.

Pair Corralation between ES Ceramics and Farm Price

Assuming the 90 days trading horizon ES Ceramics Technology is expected to generate 2.36 times more return on investment than Farm Price. However, ES Ceramics is 2.36 times more volatile than Farm Price Holdings. It trades about 0.02 of its potential returns per unit of risk. Farm Price Holdings is currently generating about -0.23 per unit of risk. If you would invest  14.00  in ES Ceramics Technology on October 25, 2024 and sell it today you would earn a total of  0.00  from holding ES Ceramics Technology or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

ES Ceramics Technology  vs.  Farm Price Holdings

ES Ceramics Technology

Risk-Adjusted Performance

1 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in ES Ceramics Technology are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent basic indicators, ES Ceramics is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Farm Price Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Farm Price Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in February 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with ES Ceramics and Farm Price

The main advantage of trading using opposite ES Ceramics and Farm Price positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ES Ceramics position performs unexpectedly, Farm Price 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 Price will offset losses from the drop in Farm Price's long position.

The idea behind ES Ceramics Technology and Farm Price Holdings 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.

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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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.