Correlation Between Dufu Tech and FARM FRESH

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

By analyzing existing cross correlation between Dufu Tech Corp and FARM FRESH BERHAD, you can compare the effects of market volatilities on Dufu Tech and FARM FRESH 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 Dufu Tech with a short position of FARM FRESH. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dufu Tech and FARM FRESH.

Diversification Opportunities for Dufu Tech and FARM FRESH

-0.3

Correlation Coefficient

Dufu Tech  FARM FRESH

Very good diversification

The 3 months correlation between Dufu and FARM is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding Dufu Tech Corp and FARM FRESH BERHAD in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FARM FRESH BERHAD and Dufu Tech 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 Dufu Tech Corp are associated (or correlated) with FARM FRESH. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FARM FRESH BERHAD has no effect on the direction of Dufu Tech i.e., Dufu Tech and FARM FRESH go up and down completely randomly.

Pair Corralation between Dufu Tech and FARM FRESH

Assuming the 90 days trading horizon Dufu Tech is expected to generate 13.06 times less return on investment than FARM FRESH. In addition to that, Dufu Tech is 1.44 times more volatile than FARM FRESH BERHAD. It trades about 0.01 of its total potential returns per unit of risk. FARM FRESH BERHAD is currently generating about 0.1 per unit of volatility. If you would invest  167.00  in FARM FRESH BERHAD on September 13, 2024 and sell it today you would earn a total of  14.00  from holding FARM FRESH BERHAD or generate 8.38% return on investment over 90 days.

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

Dufu Tech Corp  vs.  FARM FRESH BERHAD

Dufu Tech Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Dufu Tech Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, Dufu Tech is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

FARM FRESH BERHAD

Risk-Adjusted Performance

7 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in FARM FRESH BERHAD are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting basic indicators, FARM FRESH may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Dufu Tech and FARM FRESH

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

The idea behind Dufu Tech Corp and FARM FRESH BERHAD 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.