Correlation Between CB Industrial and FARM FRESH

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

By analyzing existing cross correlation between CB Industrial Product and FARM FRESH BERHAD, you can compare the effects of market volatilities on CB Industrial and FARM FRESH 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 CB Industrial with a short position of FARM FRESH. Check out your portfolio center. Please also check ongoing floating volatility patterns of CB Industrial and FARM FRESH.

Diversification Opportunities for CB Industrial and FARM FRESH

0.25

Correlation Coefficient

CB Industrial  FARM FRESH

Modest diversification

The 3 months correlation between 7076 and FARM is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding CB Industrial Product and FARM FRESH BERHAD in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FARM FRESH BERHAD and CB Industrial 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 CB Industrial Product are associated (or correlated) with FARM FRESH. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FARM FRESH BERHAD has no effect on the direction of CB Industrial i.e., CB Industrial and FARM FRESH go up and down completely randomly.

Pair Corralation between CB Industrial and FARM FRESH

Assuming the 90 days trading horizon CB Industrial Product is expected to generate 1.33 times more return on investment than FARM FRESH. However, CB Industrial is 1.33 times more volatile than FARM FRESH BERHAD. It trades about 0.04 of its potential returns per unit of risk. FARM FRESH BERHAD is currently generating about 0.03 per unit of risk. If you would invest  100.00  in CB Industrial Product on October 10, 2024 and sell it today you would earn a total of  31.00  from holding CB Industrial Product or generate 31.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.34%
Values	Daily Returns

CB Industrial Product  vs.  FARM FRESH BERHAD

CB Industrial Product

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in CB Industrial Product are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent basic indicators, CB Industrial is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

FARM FRESH BERHAD

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in FARM FRESH BERHAD are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent basic indicators, FARM FRESH is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with CB Industrial and FARM FRESH

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

The idea behind CB Industrial Product and FARM FRESH BERHAD 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.