Correlation Between Challenger and Farm Pride

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

By analyzing existing cross correlation between Challenger and Farm Pride Foods, you can compare the effects of market volatilities on Challenger and Farm Pride 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 Challenger with a short position of Farm Pride. Check out your portfolio center. Please also check ongoing floating volatility patterns of Challenger and Farm Pride.

Diversification Opportunities for Challenger and Farm Pride

-0.12

Correlation Coefficient

Challenger  Farm Pride

Good diversification

The 3 months correlation between Challenger and Farm is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding Challenger and Farm Pride Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Farm Pride Foods and Challenger 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 Challenger are associated (or correlated) with Farm Pride. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Farm Pride Foods has no effect on the direction of Challenger i.e., Challenger and Farm Pride go up and down completely randomly.

Pair Corralation between Challenger and Farm Pride

Assuming the 90 days trading horizon Challenger is expected to under-perform the Farm Pride. But the stock apears to be less risky and, when comparing its historical volatility, Challenger is 3.49 times less risky than Farm Pride. The stock trades about -0.07 of its potential returns per unit of risk. The Farm Pride Foods is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  12.00  in Farm Pride Foods on September 13, 2024 and sell it today you would earn a total of  0.00  from holding Farm Pride Foods 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

Challenger  vs.  Farm Pride Foods

Challenger

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Challenger has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's technical and fundamental indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Farm Pride Foods

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Farm Pride Foods are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain primary indicators, Farm Pride may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Challenger and Farm Pride

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

The idea behind Challenger and Farm Pride Foods 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..