Correlation Between H FARM and Data#3

Can any of the company-specific risk be diversified away by investing in both H FARM and Data#3 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 H FARM and Data#3 into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between H FARM SPA and Data3 Limited, you can compare the effects of market volatilities on H FARM and Data#3 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 H FARM with a short position of Data#3. Check out your portfolio center. Please also check ongoing floating volatility patterns of H FARM and Data#3.

Diversification Opportunities for H FARM and Data#3

-0.1

Correlation Coefficient

H FARM  Data#3

Good diversification

The 3 months correlation between 5JQ and Data#3 is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding H FARM SPA and Data3 Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Data3 Limited and H FARM 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 H FARM SPA are associated (or correlated) with Data#3. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Data3 Limited has no effect on the direction of H FARM i.e., H FARM and Data#3 go up and down completely randomly.

Pair Corralation between H FARM and Data#3

Assuming the 90 days horizon H FARM SPA is expected to generate 2.05 times more return on investment than Data#3. However, H FARM is 2.05 times more volatile than Data3 Limited. It trades about 0.03 of its potential returns per unit of risk. Data3 Limited is currently generating about -0.36 per unit of risk. If you would invest  12.00  in H FARM SPA on September 22, 2024 and sell it today you would earn a total of  0.00  from holding H FARM SPA or generate 0.0% return on investment over 90 days.

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

H FARM SPA  vs.  Data3 Limited

H FARM SPA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days H FARM SPA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Data3 Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Data3 Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with H FARM and Data#3

The main advantage of trading using opposite H FARM and Data#3 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if H FARM position performs unexpectedly, Data#3 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 Data#3 will offset losses from the drop in Data#3's long position.

The idea behind H FARM SPA and Data3 Limited 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.