Correlation Between Farm Price and Daya Materials

Can any of the company-specific risk be diversified away by investing in both Farm Price and Daya Materials 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 Daya Materials 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 Daya Materials Bhd, you can compare the effects of market volatilities on Farm Price and Daya Materials 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 Daya Materials. Check out your portfolio center. Please also check ongoing floating volatility patterns of Farm Price and Daya Materials.

Diversification Opportunities for Farm Price and Daya Materials

0.39

Correlation Coefficient

Farm Price  Daya Materials

Weak diversification

The 3 months correlation between Farm and Daya is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Farm Price Holdings and Daya Materials Bhd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Daya Materials Bhd 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 Daya Materials. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Daya Materials Bhd has no effect on the direction of Farm Price i.e., Farm Price and Daya Materials go up and down completely randomly.

Pair Corralation between Farm Price and Daya Materials

Assuming the 90 days trading horizon Farm Price Holdings is expected to under-perform the Daya Materials. But the stock apears to be less risky and, when comparing its historical volatility, Farm Price Holdings is 3.26 times less risky than Daya Materials. The stock trades about -0.12 of its potential returns per unit of risk. The Daya Materials Bhd is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  11.00  in Daya Materials Bhd on December 30, 2024 and sell it today you would lose (1.00) from holding Daya Materials Bhd or give up 9.09% of portfolio value over 90 days.

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

Farm Price Holdings  vs.  Daya Materials 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.

Daya Materials Bhd

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Daya Materials Bhd are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting basic indicators, Daya Materials may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Farm Price and Daya Materials

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

The idea behind Farm Price Holdings and Daya Materials 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.