Correlation Between Charter Hall and Farm Pride

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

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

Diversification Opportunities for Charter Hall and Farm Pride

0.81

Correlation Coefficient

Charter Hall  Farm Pride

Very poor diversification

The 3 months correlation between Charter and Farm is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Charter Hall Retail 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 Charter Hall 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 Charter Hall Retail 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 Charter Hall i.e., Charter Hall and Farm Pride go up and down completely randomly.

Pair Corralation between Charter Hall and Farm Pride

Assuming the 90 days trading horizon Charter Hall is expected to generate 4.84 times less return on investment than Farm Pride. But when comparing it to its historical volatility, Charter Hall Retail is 5.37 times less risky than Farm Pride. It trades about 0.17 of its potential returns per unit of risk. Farm Pride Foods is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  13.00  in Farm Pride Foods on December 28, 2024 and sell it today you would earn a total of  7.00  from holding Farm Pride Foods or generate 53.85% return on investment over 90 days.

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

Charter Hall Retail  vs.  Farm Pride Foods

Charter Hall Retail

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Charter Hall Retail are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Charter Hall may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Farm Pride Foods

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Farm Pride Foods are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain primary indicators, Farm Pride unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Charter Hall and Farm Pride

The main advantage of trading using opposite Charter Hall and Farm Pride positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Charter Hall 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 Charter Hall Retail 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.