Correlation Between Harboes Bryggeri and First Farms

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

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

Diversification Opportunities for Harboes Bryggeri and First Farms

0.41

Correlation Coefficient

Harboes Bryggeri  First Farms

Very weak diversification

The 3 months correlation between Harboes and First is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Harboes Bryggeri AS and First Farms AS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Farms AS and Harboes Bryggeri 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 Harboes Bryggeri AS are associated (or correlated) with First Farms. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Farms AS has no effect on the direction of Harboes Bryggeri i.e., Harboes Bryggeri and First Farms go up and down completely randomly.

Pair Corralation between Harboes Bryggeri and First Farms

Assuming the 90 days trading horizon Harboes Bryggeri AS is expected to under-perform the First Farms. In addition to that, Harboes Bryggeri is 2.33 times more volatile than First Farms AS. It trades about -0.14 of its total potential returns per unit of risk. First Farms AS is currently generating about -0.02 per unit of volatility. If you would invest  7,400  in First Farms AS on September 13, 2024 and sell it today you would lose (200.00) from holding First Farms AS or give up 2.7% of portfolio value over 90 days.

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

Harboes Bryggeri AS  vs.  First Farms AS

Harboes Bryggeri

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Harboes Bryggeri AS has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

First Farms AS

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days First Farms AS has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, First Farms is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Harboes Bryggeri and First Farms

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

The idea behind Harboes Bryggeri AS and First Farms AS 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 Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.