Correlation Between HF FOODS and Dairy Farm

Can any of the company-specific risk be diversified away by investing in both HF FOODS and Dairy Farm 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 HF FOODS and Dairy Farm into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between HF FOODS GRP and Dairy Farm International, you can compare the effects of market volatilities on HF FOODS and Dairy Farm 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 HF FOODS with a short position of Dairy Farm. Check out your portfolio center. Please also check ongoing floating volatility patterns of HF FOODS and Dairy Farm.

Diversification Opportunities for HF FOODS and Dairy Farm

0.65

Correlation Coefficient

HF FOODS  Dairy Farm

Poor diversification

The 3 months correlation between 3GX and Dairy is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding HF FOODS GRP and Dairy Farm International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dairy Farm International and HF FOODS 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 HF FOODS GRP are associated (or correlated) with Dairy Farm. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dairy Farm International has no effect on the direction of HF FOODS i.e., HF FOODS and Dairy Farm go up and down completely randomly.

Pair Corralation between HF FOODS and Dairy Farm

Assuming the 90 days horizon HF FOODS is expected to generate 8.1 times less return on investment than Dairy Farm. But when comparing it to its historical volatility, HF FOODS GRP is 1.33 times less risky than Dairy Farm. It trades about 0.01 of its potential returns per unit of risk. Dairy Farm International is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  186.00  in Dairy Farm International on October 1, 2024 and sell it today you would earn a total of  26.00  from holding Dairy Farm International or generate 13.98% return on investment over 90 days.

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

HF FOODS GRP  vs.  Dairy Farm International

HF FOODS GRP

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in HF FOODS GRP are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, HF FOODS is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Dairy Farm International

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Dairy Farm International are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Dairy Farm reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with HF FOODS and Dairy Farm

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

The idea behind HF FOODS GRP and Dairy Farm International 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.