Correlation Between Basic Fit and ForFarmers

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

By analyzing existing cross correlation between Basic Fit NV and ForFarmers NV, you can compare the effects of market volatilities on Basic Fit and ForFarmers 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 Basic Fit with a short position of ForFarmers. Check out your portfolio center. Please also check ongoing floating volatility patterns of Basic Fit and ForFarmers.

Diversification Opportunities for Basic Fit and ForFarmers

-0.27

Correlation Coefficient

Basic Fit  ForFarmers

Very good diversification

The 3 months correlation between Basic and ForFarmers is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding Basic Fit NV and ForFarmers NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ForFarmers NV and Basic Fit 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 Basic Fit NV are associated (or correlated) with ForFarmers. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ForFarmers NV has no effect on the direction of Basic Fit i.e., Basic Fit and ForFarmers go up and down completely randomly.

Pair Corralation between Basic Fit and ForFarmers

Assuming the 90 days trading horizon Basic Fit NV is expected to under-perform the ForFarmers. In addition to that, Basic Fit is 1.3 times more volatile than ForFarmers NV. It trades about -0.06 of its total potential returns per unit of risk. ForFarmers NV is currently generating about 0.07 per unit of volatility. If you would invest  318.00  in ForFarmers NV on September 19, 2024 and sell it today you would earn a total of  19.00  from holding ForFarmers NV or generate 5.97% return on investment over 90 days.

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

Basic Fit NV  vs.  ForFarmers NV

Basic Fit NV

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Basic Fit NV has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

ForFarmers NV

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in ForFarmers NV are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, ForFarmers is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Basic Fit and ForFarmers

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

The idea behind Basic Fit NV and ForFarmers NV 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.