Correlation Between H FARM and KEISEI EL

Can any of the company-specific risk be diversified away by investing in both H FARM and KEISEI EL 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 KEISEI EL 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 KEISEI EL RAILWAY, you can compare the effects of market volatilities on H FARM and KEISEI EL 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 KEISEI EL. Check out your portfolio center. Please also check ongoing floating volatility patterns of H FARM and KEISEI EL.

Diversification Opportunities for H FARM and KEISEI EL

0.04

Correlation Coefficient

H FARM  KEISEI EL

Significant diversification

The 3 months correlation between 5JQ and KEISEI is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding H FARM SPA and KEISEI EL RAILWAY in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KEISEI EL RAILWAY 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 KEISEI EL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KEISEI EL RAILWAY has no effect on the direction of H FARM i.e., H FARM and KEISEI EL go up and down completely randomly.

Pair Corralation between H FARM and KEISEI EL

Assuming the 90 days horizon H FARM SPA is expected to generate 2.57 times more return on investment than KEISEI EL. However, H FARM is 2.57 times more volatile than KEISEI EL RAILWAY. It trades about 0.12 of its potential returns per unit of risk. KEISEI EL RAILWAY is currently generating about -0.28 per unit of risk. If you would invest  11.00  in H FARM SPA on September 28, 2024 and sell it today you would earn a total of  1.00  from holding H FARM SPA or generate 9.09% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	95.24%
Values	Daily Returns

H FARM SPA  vs.  KEISEI EL RAILWAY

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.

KEISEI EL RAILWAY

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days KEISEI EL RAILWAY has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound forward indicators, KEISEI EL is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with H FARM and KEISEI EL

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

The idea behind H FARM SPA and KEISEI EL RAILWAY 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.