Correlation Between Kluang Rubber and FARM FRESH

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

By analyzing existing cross correlation between Kluang Rubber and FARM FRESH BERHAD, you can compare the effects of market volatilities on Kluang Rubber and FARM FRESH 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 Kluang Rubber with a short position of FARM FRESH. Check out your portfolio center. Please also check ongoing floating volatility patterns of Kluang Rubber and FARM FRESH.

Diversification Opportunities for Kluang Rubber and FARM FRESH

-0.53

Correlation Coefficient

Kluang Rubber  FARM FRESH

Excellent diversification

The 3 months correlation between Kluang and FARM is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding Kluang Rubber and FARM FRESH BERHAD in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FARM FRESH BERHAD and Kluang Rubber 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 Kluang Rubber are associated (or correlated) with FARM FRESH. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FARM FRESH BERHAD has no effect on the direction of Kluang Rubber i.e., Kluang Rubber and FARM FRESH go up and down completely randomly.

Pair Corralation between Kluang Rubber and FARM FRESH

Assuming the 90 days trading horizon Kluang Rubber is expected to under-perform the FARM FRESH. In addition to that, Kluang Rubber is 1.02 times more volatile than FARM FRESH BERHAD. It trades about 0.0 of its total potential returns per unit of risk. FARM FRESH BERHAD is currently generating about 0.12 per unit of volatility. If you would invest  169.00  in FARM FRESH BERHAD on September 3, 2024 and sell it today you would earn a total of  18.00  from holding FARM FRESH BERHAD or generate 10.65% return on investment over 90 days.

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

Kluang Rubber  vs.  FARM FRESH BERHAD

Kluang Rubber

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Kluang Rubber has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, Kluang Rubber is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

FARM FRESH BERHAD

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in FARM FRESH BERHAD are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting basic indicators, FARM FRESH may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Kluang Rubber and FARM FRESH

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

The idea behind Kluang Rubber and FARM FRESH BERHAD 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.