Correlation Between FARM FRESH and YTL Hospitality

Can any of the company-specific risk be diversified away by investing in both FARM FRESH 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 FRESH 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 FRESH BERHAD and YTL Hospitality REIT, you can compare the effects of market volatilities on FARM FRESH 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 FRESH with a short position of YTL Hospitality. Check out your portfolio center. Please also check ongoing floating volatility patterns of FARM FRESH and YTL Hospitality.

Diversification Opportunities for FARM FRESH and YTL Hospitality

-0.17

Correlation Coefficient

FARM FRESH  YTL Hospitality

Good diversification

The 3 months correlation between FARM and YTL is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding FARM FRESH BERHAD 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 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 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 FRESH i.e., FARM FRESH and YTL Hospitality go up and down completely randomly.

Pair Corralation between FARM FRESH and YTL Hospitality

Assuming the 90 days trading horizon FARM FRESH BERHAD is expected to generate 1.57 times more return on investment than YTL Hospitality. However, FARM FRESH is 1.57 times more volatile than YTL Hospitality REIT. It trades about 0.07 of its potential returns per unit of risk. YTL Hospitality REIT is currently generating about -0.03 per unit of risk. If you would invest  173.00  in FARM FRESH BERHAD on September 24, 2024 and sell it today you would earn a total of  9.00  from holding FARM FRESH BERHAD or generate 5.2% return on investment over 90 days.

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

FARM FRESH BERHAD  vs.  YTL Hospitality REIT

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.

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 FRESH and YTL Hospitality

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