Correlation Between H FARM and Daito Trust

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

By analyzing existing cross correlation between H FARM SPA and Daito Trust Construction, you can compare the effects of market volatilities on H FARM and Daito Trust 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 H FARM with a short position of Daito Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of H FARM and Daito Trust.

Diversification Opportunities for H FARM and Daito Trust

0.04

Correlation Coefficient

H FARM  Daito Trust

Significant diversification

The 3 months correlation between 5JQ and Daito is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding H FARM SPA and Daito Trust Construction in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Daito Trust Construction and H FARM 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 H FARM SPA are associated (or correlated) with Daito Trust. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Daito Trust Construction has no effect on the direction of H FARM i.e., H FARM and Daito Trust go up and down completely randomly.

Pair Corralation between H FARM and Daito Trust

Assuming the 90 days horizon H FARM SPA is expected to generate 4.03 times more return on investment than Daito Trust. However, H FARM is 4.03 times more volatile than Daito Trust Construction. It trades about 0.2 of its potential returns per unit of risk. Daito Trust Construction is currently generating about 0.2 per unit of risk. If you would invest  10.00  in H FARM SPA on September 24, 2024 and sell it today you would earn a total of  2.00  from holding H FARM SPA or generate 20.0% return on investment over 90 days.

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

H FARM SPA  vs.  Daito Trust Construction

H FARM SPA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days H FARM SPA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Daito Trust Construction

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Daito Trust Construction has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Daito Trust is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with H FARM and Daito Trust

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

The idea behind H FARM SPA and Daito Trust Construction 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.