Correlation Between Powerstorm Holdings and Farmhouse

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

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

Diversification Opportunities for Powerstorm Holdings and Farmhouse

0.1

Correlation Coefficient

Powerstorm Holdings  Farmhouse

Average diversification

The 3 months correlation between Powerstorm and Farmhouse is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding Powerstorm Holdings and Farmhouse in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Farmhouse and Powerstorm Holdings 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 Powerstorm Holdings are associated (or correlated) with Farmhouse. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Farmhouse has no effect on the direction of Powerstorm Holdings i.e., Powerstorm Holdings and Farmhouse go up and down completely randomly.

Pair Corralation between Powerstorm Holdings and Farmhouse

Given the investment horizon of 90 days Powerstorm Holdings is expected to under-perform the Farmhouse. But the pink sheet apears to be less risky and, when comparing its historical volatility, Powerstorm Holdings is 2.11 times less risky than Farmhouse. The pink sheet trades about -0.03 of its potential returns per unit of risk. The Farmhouse is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  16.00  in Farmhouse on October 1, 2024 and sell it today you would lose (9.03) from holding Farmhouse or give up 56.44% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.46%
Values	Daily Returns

Powerstorm Holdings  vs.  Farmhouse

Powerstorm Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Powerstorm Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Farmhouse

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Farmhouse has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable technical indicators, Farmhouse is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Powerstorm Holdings and Farmhouse

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

The idea behind Powerstorm Holdings and Farmhouse 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.