Correlation Between Farm Pride and Cooper Metals

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

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

Diversification Opportunities for Farm Pride and Cooper Metals

-0.38

Correlation Coefficient

Farm Pride  Cooper Metals

Very good diversification

The 3 months correlation between Farm and Cooper is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding Farm Pride Foods and Cooper Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cooper Metals and Farm Pride 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 Pride Foods are associated (or correlated) with Cooper Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cooper Metals has no effect on the direction of Farm Pride i.e., Farm Pride and Cooper Metals go up and down completely randomly.

Pair Corralation between Farm Pride and Cooper Metals

Assuming the 90 days trading horizon Farm Pride Foods is expected to generate 1.25 times more return on investment than Cooper Metals. However, Farm Pride is 1.25 times more volatile than Cooper Metals. It trades about 0.17 of its potential returns per unit of risk. Cooper Metals is currently generating about -0.03 per unit of risk. If you would invest  13.00  in Farm Pride Foods on December 29, 2024 and sell it today you would earn a total of  8.00  from holding Farm Pride Foods or generate 61.54% return on investment over 90 days.

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

Farm Pride Foods  vs.  Cooper Metals

Farm Pride Foods

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Farm Pride Foods are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain primary indicators, Farm Pride unveiled solid returns over the last few months and may actually be approaching a breakup point.

Cooper Metals

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Farm Pride and Cooper Metals

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

The idea behind Farm Pride Foods and Cooper Metals 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.