Correlation Between FARM FRESH and OSK Holdings

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

By analyzing existing cross correlation between FARM FRESH BERHAD and OSK Holdings Bhd, you can compare the effects of market volatilities on FARM FRESH and OSK Holdings 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 FRESH with a short position of OSK Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of FARM FRESH and OSK Holdings.

Diversification Opportunities for FARM FRESH and OSK Holdings

0.04

Correlation Coefficient

FARM FRESH  OSK Holdings

Significant diversification

The 3 months correlation between FARM and OSK is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding FARM FRESH BERHAD and OSK Holdings Bhd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on OSK Holdings Bhd and FARM FRESH 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 FRESH BERHAD are associated (or correlated) with OSK Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of OSK Holdings Bhd has no effect on the direction of FARM FRESH i.e., FARM FRESH and OSK Holdings go up and down completely randomly.

Pair Corralation between FARM FRESH and OSK Holdings

Assuming the 90 days trading horizon FARM FRESH is expected to generate 3.1 times less return on investment than OSK Holdings. But when comparing it to its historical volatility, FARM FRESH BERHAD is 1.26 times less risky than OSK Holdings. It trades about 0.12 of its potential returns per unit of risk. OSK Holdings Bhd is currently generating about 0.28 of returns per unit of risk over similar time horizon. If you would invest  160.00  in OSK Holdings Bhd on September 24, 2024 and sell it today you would earn a total of  14.00  from holding OSK Holdings Bhd or generate 8.75% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	95.45%
Values	Daily Returns

FARM FRESH BERHAD  vs.  OSK Holdings Bhd

FARM FRESH BERHAD

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in FARM FRESH BERHAD are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent basic indicators, FARM FRESH is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

OSK Holdings Bhd

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in OSK Holdings Bhd are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting basic indicators, OSK Holdings may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with FARM FRESH and OSK Holdings

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

The idea behind FARM FRESH BERHAD and OSK Holdings Bhd 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.