Correlation Between FarmStory and DAEMO Engineering

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

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

Diversification Opportunities for FarmStory and DAEMO Engineering

0.74

Correlation Coefficient

FarmStory  DAEMO Engineering

Poor diversification

The 3 months correlation between FarmStory and DAEMO is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding FarmStory Co and DAEMO Engineering Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DAEMO Engineering 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 DAEMO Engineering. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DAEMO Engineering has no effect on the direction of FarmStory i.e., FarmStory and DAEMO Engineering go up and down completely randomly.

Pair Corralation between FarmStory and DAEMO Engineering

Assuming the 90 days trading horizon FarmStory Co is expected to under-perform the DAEMO Engineering. But the stock apears to be less risky and, when comparing its historical volatility, FarmStory Co is 1.57 times less risky than DAEMO Engineering. The stock trades about -0.01 of its potential returns per unit of risk. The DAEMO Engineering Co is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  1,183,282  in DAEMO Engineering Co on December 2, 2024 and sell it today you would lose (245,282) from holding DAEMO Engineering Co or give up 20.73% of portfolio value over 90 days.

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

FarmStory Co  vs.  DAEMO Engineering 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.

DAEMO Engineering

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in DAEMO Engineering Co are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, DAEMO Engineering is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with FarmStory and DAEMO Engineering

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

The idea behind FarmStory Co and DAEMO Engineering 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.

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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.