Correlation Between DAIRY FARM and Industrial

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

By analyzing existing cross correlation between DAIRY FARM INTL and Industrial and Commercial, you can compare the effects of market volatilities on DAIRY FARM and Industrial 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 Industrial. Check out your portfolio center. Please also check ongoing floating volatility patterns of DAIRY FARM and Industrial.

Diversification Opportunities for DAIRY FARM and Industrial

-0.66

Correlation Coefficient

DAIRY FARM  Industrial

Excellent diversification

The 3 months correlation between DAIRY and Industrial is -0.66. Overlapping area represents the amount of risk that can be diversified away by holding DAIRY FARM INTL and Industrial and Commercial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Industrial and Commercial 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 INTL are associated (or correlated) with Industrial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Industrial and Commercial has no effect on the direction of DAIRY FARM i.e., DAIRY FARM and Industrial go up and down completely randomly.

Pair Corralation between DAIRY FARM and Industrial

Assuming the 90 days trading horizon DAIRY FARM INTL is expected to under-perform the Industrial. But the stock apears to be less risky and, when comparing its historical volatility, DAIRY FARM INTL is 1.6 times less risky than Industrial. The stock trades about -0.17 of its potential returns per unit of risk. The Industrial and Commercial is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  67.00  in Industrial and Commercial on December 5, 2024 and sell it today you would earn a total of  2.00  from holding Industrial and Commercial or generate 2.99% return on investment over 90 days.

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

DAIRY FARM INTL  vs.  Industrial and Commercial

DAIRY FARM INTL

Risk-Adjusted Performance

Very Weak

Over the last 90 days DAIRY FARM INTL has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Industrial and Commercial

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Industrial and Commercial are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, Industrial reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with DAIRY FARM and Industrial

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

The idea behind DAIRY FARM INTL and Industrial and Commercial 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.