Correlation Between H-FARM SPA and NISSHA CO

Can any of the company-specific risk be diversified away by investing in both H-FARM SPA and NISSHA CO 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 SPA and NISSHA CO 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 NISSHA LTD, you can compare the effects of market volatilities on H-FARM SPA and NISSHA CO 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 SPA with a short position of NISSHA CO. Check out your portfolio center. Please also check ongoing floating volatility patterns of H-FARM SPA and NISSHA CO.

Diversification Opportunities for H-FARM SPA and NISSHA CO

-0.08

Correlation Coefficient

H-FARM SPA  NISSHA CO

Good diversification

The 3 months correlation between H-FARM and NISSHA is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding H FARM SPA and NISSHA LTD in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NISSHA LTD and H-FARM SPA 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 NISSHA CO. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NISSHA LTD has no effect on the direction of H-FARM SPA i.e., H-FARM SPA and NISSHA CO go up and down completely randomly.

Pair Corralation between H-FARM SPA and NISSHA CO

Assuming the 90 days horizon H FARM SPA is expected to generate 5.36 times more return on investment than NISSHA CO. However, H-FARM SPA is 5.36 times more volatile than NISSHA LTD. It trades about 0.06 of its potential returns per unit of risk. NISSHA LTD is currently generating about -0.06 per unit of risk. If you would invest  12.00  in H FARM SPA on December 20, 2024 and sell it today you would earn a total of  1.00  from holding H FARM SPA or generate 8.33% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.33%
Values	Daily Returns

H FARM SPA  vs.  NISSHA LTD

H FARM SPA

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in H FARM SPA are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, H-FARM SPA reported solid returns over the last few months and may actually be approaching a breakup point.

NISSHA LTD

Risk-Adjusted Performance

Very Weak

Over the last 90 days NISSHA LTD has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, NISSHA CO is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with H-FARM SPA and NISSHA CO

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

The idea behind H FARM SPA and NISSHA LTD 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.