Correlation Between DAIRY FARM and Penta Ocean

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

Diversification Opportunities for DAIRY FARM and Penta Ocean

-0.41

Correlation Coefficient

DAIRY FARM  Penta Ocean

Very good diversification

The 3 months correlation between DAIRY and Penta is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding DAIRY FARM INTL and Penta Ocean Construction Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Penta Ocean Construc 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 Penta Ocean. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Penta Ocean Construc has no effect on the direction of DAIRY FARM i.e., DAIRY FARM and Penta Ocean go up and down completely randomly.

Pair Corralation between DAIRY FARM and Penta Ocean

Assuming the 90 days trading horizon DAIRY FARM INTL is expected to generate 1.7 times more return on investment than Penta Ocean. However, DAIRY FARM is 1.7 times more volatile than Penta Ocean Construction Co. It trades about 0.23 of its potential returns per unit of risk. Penta Ocean Construction Co is currently generating about -0.03 per unit of risk. If you would invest  167.00  in DAIRY FARM INTL on September 2, 2024 and sell it today you would earn a total of  67.00  from holding DAIRY FARM INTL or generate 40.12% 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 INTL  vs.  Penta Ocean Construction Co

DAIRY FARM INTL

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in DAIRY FARM INTL are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, DAIRY FARM unveiled solid returns over the last few months and may actually be approaching a breakup point.

Penta Ocean Construc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Penta Ocean Construction Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Penta Ocean 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 Penta Ocean

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

The idea behind DAIRY FARM INTL and Penta Ocean Construction Co 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.