Correlation Between CITY OFFICE and DAIRY FARM

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

By analyzing existing cross correlation between CITY OFFICE REIT and DAIRY FARM INTL, you can compare the effects of market volatilities on CITY OFFICE and DAIRY FARM 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 CITY OFFICE with a short position of DAIRY FARM. Check out your portfolio center. Please also check ongoing floating volatility patterns of CITY OFFICE and DAIRY FARM.

Diversification Opportunities for CITY OFFICE and DAIRY FARM

0.55

Correlation Coefficient

CITY OFFICE  DAIRY FARM

Very weak diversification

The 3 months correlation between CITY and DAIRY is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding CITY OFFICE REIT and DAIRY FARM INTL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DAIRY FARM INTL and CITY OFFICE 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 CITY OFFICE REIT are associated (or correlated) with DAIRY FARM. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DAIRY FARM INTL has no effect on the direction of CITY OFFICE i.e., CITY OFFICE and DAIRY FARM go up and down completely randomly.

Pair Corralation between CITY OFFICE and DAIRY FARM

Assuming the 90 days horizon CITY OFFICE REIT is expected to under-perform the DAIRY FARM. In addition to that, CITY OFFICE is 1.0 times more volatile than DAIRY FARM INTL. It trades about -0.06 of its total potential returns per unit of risk. DAIRY FARM INTL is currently generating about -0.01 per unit of volatility. If you would invest  217.00  in DAIRY FARM INTL on December 21, 2024 and sell it today you would lose (5.00) from holding DAIRY FARM INTL or give up 2.3% of portfolio value over 90 days.

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

CITY OFFICE REIT  vs.  DAIRY FARM INTL

CITY OFFICE REIT

Risk-Adjusted Performance

Very Weak

Over the last 90 days CITY OFFICE REIT has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unsteady 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.

DAIRY FARM INTL

Risk-Adjusted Performance

Very Weak

Over the last 90 days DAIRY FARM INTL has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, DAIRY FARM is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with CITY OFFICE and DAIRY FARM

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

The idea behind CITY OFFICE REIT and DAIRY FARM INTL 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 Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.