Correlation Between FARM FRESH and Sunway Construction

Can any of the company-specific risk be diversified away by investing in both FARM FRESH and Sunway Construction 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 Sunway Construction 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 Sunway Construction Group, you can compare the effects of market volatilities on FARM FRESH and Sunway Construction 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 Sunway Construction. Check out your portfolio center. Please also check ongoing floating volatility patterns of FARM FRESH and Sunway Construction.

Diversification Opportunities for FARM FRESH and Sunway Construction

-0.19

Correlation Coefficient

FARM FRESH  Sunway Construction

Good diversification

The 3 months correlation between FARM and Sunway is -0.19. Overlapping area represents the amount of risk that can be diversified away by holding FARM FRESH BERHAD and Sunway Construction Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sunway Construction 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 Sunway Construction. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sunway Construction has no effect on the direction of FARM FRESH i.e., FARM FRESH and Sunway Construction go up and down completely randomly.

Pair Corralation between FARM FRESH and Sunway Construction

Assuming the 90 days trading horizon FARM FRESH is expected to generate 1.69 times less return on investment than Sunway Construction. But when comparing it to its historical volatility, FARM FRESH BERHAD is 1.55 times less risky than Sunway Construction. It trades about 0.12 of its potential returns per unit of risk. Sunway Construction Group is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  447.00  in Sunway Construction Group on September 25, 2024 and sell it today you would earn a total of  21.00  from holding Sunway Construction Group or generate 4.7% 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.  Sunway Construction Group

FARM FRESH BERHAD

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in FARM FRESH BERHAD are ranked lower than 2 (%) 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.

Sunway Construction

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Sunway Construction Group are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent basic indicators, Sunway Construction 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 Sunway Construction

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

The idea behind FARM FRESH BERHAD and Sunway Construction Group 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.