Correlation Between FARM and Ondo

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

By analyzing existing cross correlation between FARM and Ondo, you can compare the effects of market volatilities on FARM and Ondo 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 FARM with a short position of Ondo. Check out your portfolio center. Please also check ongoing floating volatility patterns of FARM and Ondo.

Diversification Opportunities for FARM and Ondo

0.86

Correlation Coefficient

FARM  Ondo

Very poor diversification

The 3 months correlation between FARM and Ondo is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding FARM and Ondo in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ondo and 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 FARM are associated (or correlated) with Ondo. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ondo has no effect on the direction of FARM i.e., FARM and Ondo go up and down completely randomly.

Pair Corralation between FARM and Ondo

Assuming the 90 days trading horizon FARM is expected to generate 2.4 times less return on investment than Ondo. But when comparing it to its historical volatility, FARM is 1.35 times less risky than Ondo. It trades about 0.12 of its potential returns per unit of risk. Ondo is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest  60.00  in Ondo on September 3, 2024 and sell it today you would earn a total of  63.00  from holding Ondo or generate 105.0% return on investment over 90 days.

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

FARM  vs.  Ondo

FARM

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in FARM are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady fundamental indicators, FARM exhibited solid returns over the last few months and may actually be approaching a breakup point.

Ondo

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Ondo are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady fundamental indicators, Ondo exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with FARM and Ondo

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

The idea behind FARM and Ondo 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.