Correlation Between Farm Price and Homeritz Bhd

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

Diversification Opportunities for Farm Price and Homeritz Bhd

0.09

Correlation Coefficient

Farm Price  Homeritz Bhd

Significant diversification

The 3 months correlation between Farm and Homeritz is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Farm Price Holdings and Homeritz Bhd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Homeritz 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 Homeritz Bhd. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Homeritz Bhd has no effect on the direction of Farm Price i.e., Farm Price and Homeritz Bhd go up and down completely randomly.

Pair Corralation between Farm Price and Homeritz Bhd

Assuming the 90 days trading horizon Farm Price Holdings is expected to under-perform the Homeritz Bhd. In addition to that, Farm Price is 1.14 times more volatile than Homeritz Bhd. It trades about -0.04 of its total potential returns per unit of risk. Homeritz Bhd is currently generating about -0.03 per unit of volatility. If you would invest  59.00  in Homeritz Bhd on September 3, 2024 and sell it today you would lose (2.00) from holding Homeritz Bhd or give up 3.39% of portfolio value over 90 days.

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

Farm Price Holdings  vs.  Homeritz Bhd

Farm Price Holdings

Risk-Adjusted Performance

0 of 100

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 quite persistent basic indicators, Farm Price is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Homeritz Bhd

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Homeritz Bhd has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, Homeritz Bhd 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 Farm Price and Homeritz Bhd

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

The idea behind Farm Price Holdings and Homeritz 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.