Correlation Between FARM FRESH and Mr D

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

Diversification Opportunities for FARM FRESH and Mr D

0.07

Correlation Coefficient

FARM FRESH  Mr D

Significant diversification

The 3 months correlation between FARM and 5296 is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding FARM FRESH BERHAD and Mr D I in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mr D I 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 Mr D. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mr D I has no effect on the direction of FARM FRESH i.e., FARM FRESH and Mr D go up and down completely randomly.

Pair Corralation between FARM FRESH and Mr D

Assuming the 90 days trading horizon FARM FRESH BERHAD is expected to generate 0.59 times more return on investment than Mr D. However, FARM FRESH BERHAD is 1.71 times less risky than Mr D. It trades about 0.01 of its potential returns per unit of risk. Mr D I is currently generating about -0.11 per unit of risk. If you would invest  180.00  in FARM FRESH BERHAD on September 26, 2024 and sell it today you would earn a total of  0.00  from holding FARM FRESH BERHAD or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

FARM FRESH BERHAD  vs.  Mr D I

FARM FRESH BERHAD

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days FARM FRESH BERHAD has generated negative risk-adjusted returns adding no value to investors with long positions. 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.

Mr D I

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Mr D I has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in January 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with FARM FRESH and Mr D

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

The idea behind FARM FRESH BERHAD and Mr D I 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.