Correlation Between Farm Price and Supercomnet Technologies

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

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

Diversification Opportunities for Farm Price and Supercomnet Technologies

0.88

Correlation Coefficient

Farm Price  Supercomnet Technologies

Very poor diversification

The 3 months correlation between Farm and Supercomnet is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Farm Price Holdings and Supercomnet Technologies Bhd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Supercomnet Technologies and Farm Price 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 Farm Price Holdings are associated (or correlated) with Supercomnet Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Supercomnet Technologies has no effect on the direction of Farm Price i.e., Farm Price and Supercomnet Technologies go up and down completely randomly.

Pair Corralation between Farm Price and Supercomnet Technologies

Assuming the 90 days trading horizon Farm Price Holdings is expected to generate 1.35 times more return on investment than Supercomnet Technologies. However, Farm Price is 1.35 times more volatile than Supercomnet Technologies Bhd. It trades about -0.12 of its potential returns per unit of risk. Supercomnet Technologies Bhd is currently generating about -0.17 per unit of risk. If you would invest  51.00  in Farm Price Holdings on December 25, 2024 and sell it today you would lose (9.00) from holding Farm Price Holdings or give up 17.65% of portfolio value over 90 days.

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

Farm Price Holdings  vs.  Supercomnet Technologies Bhd

Farm Price Holdings

Risk-Adjusted Performance

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 April 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Supercomnet Technologies

Risk-Adjusted Performance

Very Weak

Over the last 90 days Supercomnet Technologies Bhd 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 April 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with Farm Price and Supercomnet Technologies

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

The idea behind Farm Price Holdings and Supercomnet Technologies Bhd 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.