Correlation Between Jeudan and First Farms

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

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

Diversification Opportunities for Jeudan and First Farms

-0.53

Correlation Coefficient

Jeudan  First Farms

Excellent diversification

The 3 months correlation between Jeudan and First is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding Jeudan 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 Jeudan 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 Jeudan 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 Jeudan i.e., Jeudan and First Farms go up and down completely randomly.

Pair Corralation between Jeudan and First Farms

Assuming the 90 days trading horizon Jeudan is expected to generate 176.87 times less return on investment than First Farms. But when comparing it to its historical volatility, Jeudan is 1.52 times less risky than First Farms. It trades about 0.0 of its potential returns per unit of risk. First Farms AS is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  7,100  in First Farms AS on December 30, 2024 and sell it today you would earn a total of  1,300  from holding First Farms AS or generate 18.31% return on investment over 90 days.

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

Jeudan  vs.  First Farms AS

Jeudan

Risk-Adjusted Performance

Very Weak

Over the last 90 days Jeudan has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Jeudan is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

First Farms AS

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in First Farms AS are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unfluctuating basic indicators, First Farms sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Jeudan and First Farms

The main advantage of trading using opposite Jeudan and First Farms positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Jeudan 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 Jeudan 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.