Correlation Between Press Metal and Farm Price

Can any of the company-specific risk be diversified away by investing in both Press Metal and Farm Price 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 Press Metal and Farm Price into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Press Metal Bhd and Farm Price Holdings, you can compare the effects of market volatilities on Press Metal and Farm Price 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 Press Metal with a short position of Farm Price. Check out your portfolio center. Please also check ongoing floating volatility patterns of Press Metal and Farm Price.

Diversification Opportunities for Press Metal and Farm Price

0.06

Correlation Coefficient

Press Metal  Farm Price

Significant diversification

The 3 months correlation between Press and Farm is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding Press Metal Bhd and Farm Price Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Farm Price Holdings and Press Metal 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 Press Metal Bhd are associated (or correlated) with Farm Price. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Farm Price Holdings has no effect on the direction of Press Metal i.e., Press Metal and Farm Price go up and down completely randomly.

Pair Corralation between Press Metal and Farm Price

Assuming the 90 days trading horizon Press Metal Bhd is expected to generate 1.12 times more return on investment than Farm Price. However, Press Metal is 1.12 times more volatile than Farm Price Holdings. It trades about 0.04 of its potential returns per unit of risk. Farm Price Holdings is currently generating about -0.06 per unit of risk. If you would invest  489.00  in Press Metal Bhd on September 15, 2024 and sell it today you would earn a total of  16.00  from holding Press Metal Bhd or generate 3.27% return on investment over 90 days.

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

Press Metal Bhd  vs.  Farm Price Holdings

Press Metal Bhd

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Press Metal Bhd are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent basic indicators, Press Metal is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Farm Price Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Farm Price Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest conflicting performance, the Stock's basic indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Pair Trading with Press Metal and Farm Price

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

The idea behind Press Metal Bhd and Farm Price Holdings 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.