Correlation Between Dairy Farm and EMBARK EDUCATION

Can any of the company-specific risk be diversified away by investing in both Dairy Farm and EMBARK EDUCATION 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 EMBARK EDUCATION 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 EMBARK EDUCATION LTD, you can compare the effects of market volatilities on Dairy Farm and EMBARK EDUCATION 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 EMBARK EDUCATION. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dairy Farm and EMBARK EDUCATION.

Diversification Opportunities for Dairy Farm and EMBARK EDUCATION

0.54

Correlation Coefficient

Dairy Farm  EMBARK EDUCATION

Very weak diversification

The 3 months correlation between Dairy and EMBARK is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Dairy Farm International and EMBARK EDUCATION LTD in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EMBARK EDUCATION LTD 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 EMBARK EDUCATION. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EMBARK EDUCATION LTD has no effect on the direction of Dairy Farm i.e., Dairy Farm and EMBARK EDUCATION go up and down completely randomly.

Pair Corralation between Dairy Farm and EMBARK EDUCATION

Assuming the 90 days trading horizon Dairy Farm International is expected to generate 5.04 times more return on investment than EMBARK EDUCATION. However, Dairy Farm is 5.04 times more volatile than EMBARK EDUCATION LTD. It trades about 0.12 of its potential returns per unit of risk. EMBARK EDUCATION LTD is currently generating about 0.13 per unit of risk. If you would invest  188.00  in Dairy Farm International on October 11, 2024 and sell it today you would earn a total of  30.00  from holding Dairy Farm International or generate 15.96% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.31%
Values	Daily Returns

Dairy Farm International  vs.  EMBARK EDUCATION LTD

Dairy Farm International

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Dairy Farm International are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Dairy Farm reported solid returns over the last few months and may actually be approaching a breakup point.

EMBARK EDUCATION LTD

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in EMBARK EDUCATION LTD are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, EMBARK EDUCATION is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Dairy Farm and EMBARK EDUCATION

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

The idea behind Dairy Farm International and EMBARK EDUCATION LTD 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.