Correlation Between CPE Technology and Farm Price

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

By analyzing existing cross correlation between CPE Technology Berhad and Farm Price Holdings, you can compare the effects of market volatilities on CPE Technology and Farm Price 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 CPE Technology with a short position of Farm Price. Check out your portfolio center. Please also check ongoing floating volatility patterns of CPE Technology and Farm Price.

Diversification Opportunities for CPE Technology and Farm Price

0.64

Correlation Coefficient

CPE Technology  Farm Price

Poor diversification

The 3 months correlation between CPE and Farm is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding CPE Technology Berhad and Farm Price Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Farm Price Holdings and CPE Technology 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 CPE Technology Berhad are associated (or correlated) with Farm Price. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Farm Price Holdings has no effect on the direction of CPE Technology i.e., CPE Technology and Farm Price go up and down completely randomly.

Pair Corralation between CPE Technology and Farm Price

Assuming the 90 days trading horizon CPE Technology Berhad is expected to generate 1.37 times more return on investment than Farm Price. However, CPE Technology is 1.37 times more volatile than Farm Price Holdings. It trades about -0.16 of its potential returns per unit of risk. Farm Price Holdings is currently generating about -0.23 per unit of risk. If you would invest  93.00  in CPE Technology Berhad on December 23, 2024 and sell it today you would lose (23.00) from holding CPE Technology Berhad or give up 24.73% of portfolio value over 90 days.

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

CPE Technology Berhad  vs.  Farm Price Holdings

CPE Technology Berhad

Risk-Adjusted Performance

Very Weak

Over the last 90 days CPE Technology Berhad 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.

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 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 CPE Technology and Farm Price

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

The idea behind CPE Technology Berhad and Farm Price Holdings 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.