Correlation Between Dairy Farm and Regions Financial

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

Diversification Opportunities for Dairy Farm and Regions Financial

0.88

Correlation Coefficient

Dairy Farm  Regions Financial

Very poor diversification

The 3 months correlation between Dairy and Regions is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Dairy Farm International and Regions Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Regions Financial 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 Regions Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Regions Financial has no effect on the direction of Dairy Farm i.e., Dairy Farm and Regions Financial go up and down completely randomly.

Pair Corralation between Dairy Farm and Regions Financial

Assuming the 90 days trading horizon Dairy Farm International is expected to generate 2.08 times more return on investment than Regions Financial. However, Dairy Farm is 2.08 times more volatile than Regions Financial. It trades about 0.15 of its potential returns per unit of risk. Regions Financial is currently generating about 0.17 per unit of risk. If you would invest  153.00  in Dairy Farm International on September 16, 2024 and sell it today you would earn a total of  61.00  from holding Dairy Farm International or generate 39.87% return on investment over 90 days.

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

Dairy Farm International  vs.  Regions Financial

Dairy Farm International

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Dairy Farm International are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Dairy Farm reported solid returns over the last few months and may actually be approaching a breakup point.

Regions Financial

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Regions Financial are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Regions Financial reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Dairy Farm and Regions Financial

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

The idea behind Dairy Farm International and Regions Financial 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.

Check out your portfolio center.

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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.