Correlation Between Peninsula Energy and DAIRY FARM

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

By analyzing existing cross correlation between Peninsula Energy Limited and DAIRY FARM INTL, you can compare the effects of market volatilities on Peninsula Energy and DAIRY FARM 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 Peninsula Energy with a short position of DAIRY FARM. Check out your portfolio center. Please also check ongoing floating volatility patterns of Peninsula Energy and DAIRY FARM.

Diversification Opportunities for Peninsula Energy and DAIRY FARM

-0.48

Correlation Coefficient

Peninsula Energy  DAIRY FARM

Very good diversification

The 3 months correlation between Peninsula and DAIRY is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding Peninsula Energy Limited and DAIRY FARM INTL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DAIRY FARM INTL and Peninsula Energy 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 Peninsula Energy Limited are associated (or correlated) with DAIRY FARM. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DAIRY FARM INTL has no effect on the direction of Peninsula Energy i.e., Peninsula Energy and DAIRY FARM go up and down completely randomly.

Pair Corralation between Peninsula Energy and DAIRY FARM

Assuming the 90 days horizon Peninsula Energy Limited is expected to under-perform the DAIRY FARM. In addition to that, Peninsula Energy is 2.76 times more volatile than DAIRY FARM INTL. It trades about -0.02 of its total potential returns per unit of risk. DAIRY FARM INTL is currently generating about 0.21 per unit of volatility. If you would invest  158.00  in DAIRY FARM INTL on September 16, 2024 and sell it today you would earn a total of  60.00  from holding DAIRY FARM INTL or generate 37.97% return on investment over 90 days.

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

Peninsula Energy Limited  vs.  DAIRY FARM INTL

Peninsula Energy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Peninsula Energy Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

DAIRY FARM INTL

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in DAIRY FARM INTL are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, DAIRY FARM unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Peninsula Energy and DAIRY FARM

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

The idea behind Peninsula Energy Limited and DAIRY FARM INTL 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.