Correlation Between Ho Hup and Farm Price

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

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

Diversification Opportunities for Ho Hup and Farm Price

-0.46

Correlation Coefficient

Ho Hup  Farm Price

Very good diversification

The 3 months correlation between 5169 and Farm is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding Ho Hup Construction and Farm Price Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Farm Price Holdings and Ho Hup 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 Ho Hup Construction are associated (or correlated) with Farm Price. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Farm Price Holdings has no effect on the direction of Ho Hup i.e., Ho Hup and Farm Price go up and down completely randomly.

Pair Corralation between Ho Hup and Farm Price

Assuming the 90 days trading horizon Ho Hup Construction is expected to generate 5.4 times more return on investment than Farm Price. However, Ho Hup is 5.4 times more volatile than Farm Price Holdings. It trades about -0.02 of its potential returns per unit of risk. Farm Price Holdings is currently generating about -0.21 per unit of risk. If you would invest  17.00  in Ho Hup Construction on September 17, 2024 and sell it today you would lose (1.00) from holding Ho Hup Construction or give up 5.88% of portfolio value over 90 days.

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

Ho Hup Construction  vs.  Farm Price Holdings

Ho Hup Construction

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Ho Hup Construction are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting basic indicators, Ho Hup disclosed solid returns over the last few months and may actually be approaching a breakup point.

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 quite persistent basic indicators, Farm Price 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 Ho Hup and Farm Price

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

The idea behind Ho Hup Construction and Farm Price Holdings 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.