Correlation Between DAIRY FARM and COMMERCIAL VEHICLE

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

By analyzing existing cross correlation between DAIRY FARM INTL and COMMERCIAL VEHICLE, you can compare the effects of market volatilities on DAIRY FARM and COMMERCIAL VEHICLE 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 DAIRY FARM with a short position of COMMERCIAL VEHICLE. Check out your portfolio center. Please also check ongoing floating volatility patterns of DAIRY FARM and COMMERCIAL VEHICLE.

Diversification Opportunities for DAIRY FARM and COMMERCIAL VEHICLE

-0.8

Correlation Coefficient

DAIRY FARM  COMMERCIAL VEHICLE

Pay attention - limited upside

The 3 months correlation between DAIRY and COMMERCIAL is -0.8. Overlapping area represents the amount of risk that can be diversified away by holding DAIRY FARM INTL and COMMERCIAL VEHICLE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on COMMERCIAL VEHICLE and DAIRY 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 DAIRY FARM INTL are associated (or correlated) with COMMERCIAL VEHICLE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of COMMERCIAL VEHICLE has no effect on the direction of DAIRY FARM i.e., DAIRY FARM and COMMERCIAL VEHICLE go up and down completely randomly.

Pair Corralation between DAIRY FARM and COMMERCIAL VEHICLE

Assuming the 90 days trading horizon DAIRY FARM INTL is expected to generate 0.4 times more return on investment than COMMERCIAL VEHICLE. However, DAIRY FARM INTL is 2.51 times less risky than COMMERCIAL VEHICLE. It trades about -0.15 of its potential returns per unit of risk. COMMERCIAL VEHICLE is currently generating about -0.15 per unit of risk. If you would invest  236.00  in DAIRY FARM INTL on September 28, 2024 and sell it today you would lose (12.00) from holding DAIRY FARM INTL or give up 5.08% of portfolio value over 90 days.

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

DAIRY FARM INTL  vs.  COMMERCIAL VEHICLE

DAIRY FARM INTL

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in DAIRY FARM INTL are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, DAIRY FARM unveiled solid returns over the last few months and may actually be approaching a breakup point.

COMMERCIAL VEHICLE

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days COMMERCIAL VEHICLE has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with DAIRY FARM and COMMERCIAL VEHICLE

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

The idea behind DAIRY FARM INTL and COMMERCIAL VEHICLE 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.