Correlation Between FarmStory and KMH Hitech

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

By analyzing existing cross correlation between FarmStory Co and KMH Hitech Co, you can compare the effects of market volatilities on FarmStory and KMH Hitech 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 FarmStory with a short position of KMH Hitech. Check out your portfolio center. Please also check ongoing floating volatility patterns of FarmStory and KMH Hitech.

Diversification Opportunities for FarmStory and KMH Hitech

0.75

Correlation Coefficient

FarmStory  KMH Hitech

Poor diversification

The 3 months correlation between FarmStory and KMH is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding FarmStory Co and KMH Hitech Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KMH Hitech and FarmStory 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 FarmStory Co are associated (or correlated) with KMH Hitech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KMH Hitech has no effect on the direction of FarmStory i.e., FarmStory and KMH Hitech go up and down completely randomly.

Pair Corralation between FarmStory and KMH Hitech

Assuming the 90 days trading horizon FarmStory is expected to generate 1.65 times less return on investment than KMH Hitech. In addition to that, FarmStory is 1.02 times more volatile than KMH Hitech Co. It trades about 0.07 of its total potential returns per unit of risk. KMH Hitech Co is currently generating about 0.12 per unit of volatility. If you would invest  87,400  in KMH Hitech Co on December 2, 2024 and sell it today you would earn a total of  11,500  from holding KMH Hitech Co or generate 13.16% return on investment over 90 days.

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

FarmStory Co  vs.  KMH Hitech Co

FarmStory

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in FarmStory Co are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, FarmStory may actually be approaching a critical reversion point that can send shares even higher in April 2025.

KMH Hitech

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in KMH Hitech Co are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, KMH Hitech sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with FarmStory and KMH Hitech

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

The idea behind FarmStory Co and KMH Hitech Co 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.