Correlation Between CHR and FARM

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

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

Diversification Opportunities for CHR and FARM

0.98

Correlation Coefficient

CHR  FARM

Almost no diversification

The 3 months correlation between CHR and FARM is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding CHR and FARM in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FARM and CHR 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 CHR are associated (or correlated) with FARM. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FARM has no effect on the direction of CHR i.e., CHR and FARM go up and down completely randomly.

Pair Corralation between CHR and FARM

Assuming the 90 days trading horizon CHR is expected to under-perform the FARM. In addition to that, CHR is 1.4 times more volatile than FARM. It trades about -0.17 of its total potential returns per unit of risk. FARM is currently generating about -0.12 per unit of volatility. If you would invest  4,639  in FARM on December 29, 2024 and sell it today you would lose (1,648) from holding FARM or give up 35.52% of portfolio value over 90 days.

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

CHR  vs.  FARM

CHR

Risk-Adjusted Performance

Very Weak

Over the last 90 days CHR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Crypto's basic indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for CHR shareholders.

FARM

Risk-Adjusted Performance

Very Weak

Over the last 90 days FARM has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Crypto's fundamental indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for FARM shareholders.

Pair Trading with CHR and FARM

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

The idea behind CHR and FARM 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.