Correlation Between Dairy Farm and Haier Smart

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

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

Diversification Opportunities for Dairy Farm and Haier Smart

-0.44

Correlation Coefficient

Dairy Farm  Haier Smart

Very good diversification

The 3 months correlation between Dairy and Haier is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding Dairy Farm International and Haier Smart Home in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Haier Smart Home and Dairy Farm 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 Dairy Farm International are associated (or correlated) with Haier Smart. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Haier Smart Home has no effect on the direction of Dairy Farm i.e., Dairy Farm and Haier Smart go up and down completely randomly.

Pair Corralation between Dairy Farm and Haier Smart

Assuming the 90 days trading horizon Dairy Farm International is expected to generate 1.27 times more return on investment than Haier Smart. However, Dairy Farm is 1.27 times more volatile than Haier Smart Home. It trades about 0.08 of its potential returns per unit of risk. Haier Smart Home is currently generating about -0.02 per unit of risk. If you would invest  197.00  in Dairy Farm International on October 6, 2024 and sell it today you would earn a total of  19.00  from holding Dairy Farm International or generate 9.64% return on investment over 90 days.

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

Dairy Farm International  vs.  Haier Smart Home

Dairy Farm International

Risk-Adjusted Performance

6 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Dairy Farm International are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Dairy Farm may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Haier Smart Home

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Dairy Farm and Haier Smart

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

The idea behind Dairy Farm International and Haier Smart Home 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.