Correlation Between Dairy Farm and North American

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

Diversification Opportunities for Dairy Farm and North American

0.4

Correlation Coefficient

Dairy Farm  North American

Very weak diversification

The 3 months correlation between Dairy and North is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Dairy Farm International and North American Construction in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on North American Const 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 North American. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of North American Const has no effect on the direction of Dairy Farm i.e., Dairy Farm and North American go up and down completely randomly.

Pair Corralation between Dairy Farm and North American

Assuming the 90 days trading horizon Dairy Farm International is expected to under-perform the North American. But the stock apears to be less risky and, when comparing its historical volatility, Dairy Farm International is 1.99 times less risky than North American. The stock trades about -0.1 of its potential returns per unit of risk. The North American Construction is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  1,940  in North American Construction on October 20, 2024 and sell it today you would earn a total of  100.00  from holding North American Construction or generate 5.15% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	94.44%
Values	Daily Returns

Dairy Farm International  vs.  North American Construction

Dairy Farm International

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Dairy Farm International are ranked lower than 5 (%) 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.

North American Const

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in North American Construction are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, North American reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Dairy Farm and North American

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

The idea behind Dairy Farm International and North American Construction 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.