Correlation Between ForFarmers and BS Group

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

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

Diversification Opportunities for ForFarmers and BS Group

-0.43

Correlation Coefficient

ForFarmers  BS Group

Very good diversification

The 3 months correlation between ForFarmers and BSGR is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding ForFarmers NV and BS Group SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BS Group SA and ForFarmers 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 ForFarmers NV are associated (or correlated) with BS Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BS Group SA has no effect on the direction of ForFarmers i.e., ForFarmers and BS Group go up and down completely randomly.

Pair Corralation between ForFarmers and BS Group

Assuming the 90 days trading horizon ForFarmers NV is expected to generate 0.71 times more return on investment than BS Group. However, ForFarmers NV is 1.4 times less risky than BS Group. It trades about 0.1 of its potential returns per unit of risk. BS Group SA is currently generating about -0.07 per unit of risk. If you would invest  316.00  in ForFarmers NV on September 20, 2024 and sell it today you would earn a total of  26.00  from holding ForFarmers NV or generate 8.23% return on investment over 90 days.

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

ForFarmers NV  vs.  BS Group SA

ForFarmers NV

Risk-Adjusted Performance

7 of 100

OK

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

BS Group SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BS Group SA 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.

Pair Trading with ForFarmers and BS Group

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

The idea behind ForFarmers NV and BS Group SA 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.