Correlation Between Farm Price and YTL Hospitality

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

By analyzing existing cross correlation between Farm Price Holdings and YTL Hospitality REIT, you can compare the effects of market volatilities on Farm Price and YTL Hospitality 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 Price with a short position of YTL Hospitality. Check out your portfolio center. Please also check ongoing floating volatility patterns of Farm Price and YTL Hospitality.

Diversification Opportunities for Farm Price and YTL Hospitality

0.43

Correlation Coefficient

Farm Price  YTL Hospitality

Very weak diversification

The 3 months correlation between Farm and YTL is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Farm Price Holdings and YTL Hospitality REIT in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on YTL Hospitality REIT and Farm Price 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 Price Holdings are associated (or correlated) with YTL Hospitality. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of YTL Hospitality REIT has no effect on the direction of Farm Price i.e., Farm Price and YTL Hospitality go up and down completely randomly.

Pair Corralation between Farm Price and YTL Hospitality

Assuming the 90 days trading horizon Farm Price Holdings is expected to generate 2.96 times more return on investment than YTL Hospitality. However, Farm Price is 2.96 times more volatile than YTL Hospitality REIT. It trades about 0.06 of its potential returns per unit of risk. YTL Hospitality REIT is currently generating about 0.09 per unit of risk. If you would invest  41.00  in Farm Price Holdings on September 26, 2024 and sell it today you would earn a total of  10.00  from holding Farm Price Holdings or generate 24.39% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	31.96%
Values	Daily Returns

Farm Price Holdings  vs.  YTL Hospitality REIT

Farm Price Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Farm Price Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest conflicting performance, the Stock's basic indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

YTL Hospitality REIT

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days YTL Hospitality REIT has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, YTL Hospitality is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Farm Price and YTL Hospitality

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

The idea behind Farm Price Holdings and YTL Hospitality REIT 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.