Correlation Between FARM FRESH and Senheng New
Can any of the company-specific risk be diversified away by investing in both FARM FRESH and Senheng New 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 Senheng New 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 Senheng New Retail, you can compare the effects of market volatilities on FARM FRESH and Senheng New 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 Senheng New. Check out your portfolio center. Please also check ongoing floating volatility patterns of FARM FRESH and Senheng New.
Diversification Opportunities for FARM FRESH and Senheng New
0.04 | Correlation Coefficient |
Significant diversification
The 3 months correlation between FARM and Senheng is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding FARM FRESH BERHAD and Senheng New Retail in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Senheng New Retail 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 Senheng New. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Senheng New Retail has no effect on the direction of FARM FRESH i.e., FARM FRESH and Senheng New go up and down completely randomly.
Pair Corralation between FARM FRESH and Senheng New
Assuming the 90 days trading horizon FARM FRESH is expected to generate 5.77 times less return on investment than Senheng New. But when comparing it to its historical volatility, FARM FRESH BERHAD is 2.06 times less risky than Senheng New. It trades about 0.12 of its potential returns per unit of risk. Senheng New Retail is currently generating about 0.32 of returns per unit of risk over similar time horizon. If you would invest 24.00 in Senheng New Retail on September 24, 2024 and sell it today you would earn a total of 4.00 from holding Senheng New Retail or generate 16.67% 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. Senheng New Retail
Performance |
Timeline |
FARM FRESH BERHAD |
Senheng New Retail |
FARM FRESH and Senheng New Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with FARM FRESH and Senheng New
The main advantage of trading using opposite FARM FRESH and Senheng New positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if FARM FRESH position performs unexpectedly, Senheng New 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 Senheng New will offset losses from the drop in Senheng New's long position.FARM FRESH vs. Nestle Bhd | FARM FRESH vs. PPB Group Bhd | FARM FRESH vs. IOI Bhd | FARM FRESH vs. FGV Holdings Bhd |
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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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.
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