Correlation Between Farm Price and Kawan Food

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

Diversification Opportunities for Farm Price and Kawan Food

0.78

Correlation Coefficient

Farm Price  Kawan Food

Poor diversification

The 3 months correlation between Farm and Kawan is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Farm Price Holdings and Kawan Food Bhd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kawan Food 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 Kawan Food. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kawan Food Bhd has no effect on the direction of Farm Price i.e., Farm Price and Kawan Food go up and down completely randomly.

Pair Corralation between Farm Price and Kawan Food

Assuming the 90 days trading horizon Farm Price Holdings is expected to under-perform the Kawan Food. In addition to that, Farm Price is 1.5 times more volatile than Kawan Food Bhd. It trades about -0.23 of its total potential returns per unit of risk. Kawan Food Bhd is currently generating about -0.19 per unit of volatility. If you would invest  164.00  in Kawan Food Bhd on December 22, 2024 and sell it today you would lose (24.00) from holding Kawan Food Bhd or give up 14.63% of portfolio value over 90 days.

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

Farm Price Holdings  vs.  Kawan Food 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 weak 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.

Kawan Food Bhd

Risk-Adjusted Performance

Very Weak

Over the last 90 days Kawan Food 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 Kawan Food

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

The idea behind Farm Price Holdings and Kawan Food 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.