Correlation Between SKONEC Entertainment and FarmStory

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Can any of the company-specific risk be diversified away by investing in both SKONEC Entertainment and FarmStory 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 SKONEC Entertainment and FarmStory into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between SKONEC Entertainment Co and FarmStory Co, you can compare the effects of market volatilities on SKONEC Entertainment and FarmStory 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 SKONEC Entertainment with a short position of FarmStory. Check out your portfolio center. Please also check ongoing floating volatility patterns of SKONEC Entertainment and FarmStory.

Diversification Opportunities for SKONEC Entertainment and FarmStory

0.81
  Correlation Coefficient

Very poor diversification

The 3 months correlation between SKONEC and FarmStory is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding SKONEC Entertainment Co and FarmStory Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FarmStory and SKONEC Entertainment 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 SKONEC Entertainment Co are associated (or correlated) with FarmStory. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FarmStory has no effect on the direction of SKONEC Entertainment i.e., SKONEC Entertainment and FarmStory go up and down completely randomly.

Pair Corralation between SKONEC Entertainment and FarmStory

Assuming the 90 days trading horizon SKONEC Entertainment Co is expected to under-perform the FarmStory. In addition to that, SKONEC Entertainment is 1.51 times more volatile than FarmStory Co. It trades about -0.07 of its total potential returns per unit of risk. FarmStory Co is currently generating about -0.04 per unit of volatility. If you would invest  181,395  in FarmStory Co on September 11, 2024 and sell it today you would lose (79,595) from holding FarmStory Co or give up 43.88% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy99.79%
ValuesDaily Returns

SKONEC Entertainment Co  vs.  FarmStory Co

 Performance 
       Timeline  
SKONEC Entertainment 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days SKONEC Entertainment Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, SKONEC Entertainment is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.
FarmStory 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days FarmStory Co 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 somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

SKONEC Entertainment and FarmStory Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with SKONEC Entertainment and FarmStory

The main advantage of trading using opposite SKONEC Entertainment and FarmStory positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SKONEC Entertainment position performs unexpectedly, FarmStory 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 FarmStory will offset losses from the drop in FarmStory's long position.
The idea behind SKONEC Entertainment Co and FarmStory Co 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.
Check out your portfolio center.
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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.

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