Correlation Between FARM FRESH and CB Industrial

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

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

Diversification Opportunities for FARM FRESH and CB Industrial

0.25

Correlation Coefficient

FARM FRESH  CB Industrial

Modest diversification

The 3 months correlation between FARM and 7076 is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding FARM FRESH BERHAD and CB Industrial Product in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CB Industrial Product and FARM FRESH 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 FRESH BERHAD are associated (or correlated) with CB Industrial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CB Industrial Product has no effect on the direction of FARM FRESH i.e., FARM FRESH and CB Industrial go up and down completely randomly.

Pair Corralation between FARM FRESH and CB Industrial

Assuming the 90 days trading horizon FARM FRESH is expected to generate 7.48 times less return on investment than CB Industrial. But when comparing it to its historical volatility, FARM FRESH BERHAD is 1.5 times less risky than CB Industrial. It trades about 0.01 of its potential returns per unit of risk. CB Industrial Product is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  130.00  in CB Industrial Product on October 10, 2024 and sell it today you would earn a total of  1.00  from holding CB Industrial Product or generate 0.77% return on investment over 90 days.

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

FARM FRESH BERHAD  vs.  CB Industrial Product

FARM FRESH BERHAD

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in FARM FRESH BERHAD are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent basic indicators, FARM FRESH is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

CB Industrial Product

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in CB Industrial Product are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent basic indicators, CB Industrial 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 FRESH and CB Industrial

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

The idea behind FARM FRESH BERHAD and CB Industrial Product 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.