Correlation Between Farm Pride and Queste Communications

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

Diversification Opportunities for Farm Pride and Queste Communications

-0.25

Correlation Coefficient

Farm Pride  Queste Communications

Very good diversification

The 3 months correlation between Farm and Queste is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding Farm Pride Foods and Queste Communications in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Queste Communications 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 Queste Communications. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Queste Communications has no effect on the direction of Farm Pride i.e., Farm Pride and Queste Communications go up and down completely randomly.

Pair Corralation between Farm Pride and Queste Communications

Assuming the 90 days trading horizon Farm Pride Foods is expected to generate 19.8 times more return on investment than Queste Communications. However, Farm Pride is 19.8 times more volatile than Queste Communications. It trades about 0.05 of its potential returns per unit of risk. Queste Communications is currently generating about -0.12 per unit of risk. If you would invest  11.00  in Farm Pride Foods on September 5, 2024 and sell it today you would earn a total of  1.00  from holding Farm Pride Foods or generate 9.09% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.46%
Values	Daily Returns

Farm Pride Foods  vs.  Queste Communications

Farm Pride Foods

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Farm Pride Foods are ranked lower than 4 (%) 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.

Queste Communications

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Queste Communications has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable technical and fundamental indicators, Queste Communications is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Farm Pride and Queste Communications

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

The idea behind Farm Pride Foods and Queste Communications 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.