Correlation Between Farm Pride and Centaurus Metals

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

Diversification Opportunities for Farm Pride and Centaurus Metals

0.3

Correlation Coefficient

Farm Pride  Centaurus Metals

Weak diversification

The 3 months correlation between Farm and Centaurus is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Farm Pride Foods and Centaurus Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Centaurus 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 Centaurus Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Centaurus Metals has no effect on the direction of Farm Pride i.e., Farm Pride and Centaurus Metals go up and down completely randomly.

Pair Corralation between Farm Pride and Centaurus Metals

Assuming the 90 days trading horizon Farm Pride Foods is expected to generate 1.32 times more return on investment than Centaurus Metals. However, Farm Pride is 1.32 times more volatile than Centaurus Metals. It trades about 0.17 of its potential returns per unit of risk. Centaurus Metals is currently generating about 0.03 per unit of risk. If you would invest  13.00  in Farm Pride Foods on December 27, 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 Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Farm Pride Foods  vs.  Centaurus 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.

Centaurus Metals

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Centaurus Metals are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain primary indicators, Centaurus Metals may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Farm Pride and Centaurus Metals

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

The idea behind Farm Pride Foods and Centaurus 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.

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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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.