Correlation Between ES Ceramics and FARM FRESH

Can any of the company-specific risk be diversified away by investing in both ES Ceramics and FARM FRESH 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 FRESH 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 FRESH BERHAD, you can compare the effects of market volatilities on ES Ceramics and FARM FRESH 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 FRESH. Check out your portfolio center. Please also check ongoing floating volatility patterns of ES Ceramics and FARM FRESH.

Diversification Opportunities for ES Ceramics and FARM FRESH

0.18

Correlation Coefficient

ES Ceramics  FARM FRESH

Average diversification

The 3 months correlation between 0100 and FARM is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding ES Ceramics Technology and FARM FRESH BERHAD in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FARM FRESH BERHAD 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 FRESH. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FARM FRESH BERHAD has no effect on the direction of ES Ceramics i.e., ES Ceramics and FARM FRESH go up and down completely randomly.

Pair Corralation between ES Ceramics and FARM FRESH

Assuming the 90 days trading horizon ES Ceramics is expected to generate 1.91 times less return on investment than FARM FRESH. In addition to that, ES Ceramics is 2.44 times more volatile than FARM FRESH BERHAD. It trades about 0.01 of its total potential returns per unit of risk. FARM FRESH BERHAD is currently generating about 0.03 per unit of volatility. If you would invest  158.00  in FARM FRESH BERHAD on October 10, 2024 and sell it today you would earn a total of  25.00  from holding FARM FRESH BERHAD or generate 15.82% return on investment over 90 days.

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

ES Ceramics Technology  vs.  FARM FRESH BERHAD

ES Ceramics Technology

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in ES Ceramics Technology are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting basic indicators, ES Ceramics may actually be approaching a critical reversion point that can send shares even higher in February 2025.

FARM FRESH BERHAD

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in FARM FRESH BERHAD are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent basic indicators, FARM FRESH is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with ES Ceramics and FARM FRESH

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

The idea behind ES Ceramics Technology and FARM FRESH BERHAD 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.