Correlation Between Phonex and Farmhouse

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

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

Diversification Opportunities for Phonex and Farmhouse

-0.26

Correlation Coefficient

Phonex  Farmhouse

Very good diversification

The 3 months correlation between Phonex and Farmhouse is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding Phonex Inc and Farmhouse in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Farmhouse and Phonex 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 Phonex Inc 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 Phonex i.e., Phonex and Farmhouse go up and down completely randomly.

Pair Corralation between Phonex and Farmhouse

Given the investment horizon of 90 days Phonex Inc is expected to generate 0.24 times more return on investment than Farmhouse. However, Phonex Inc is 4.1 times less risky than Farmhouse. It trades about 0.06 of its potential returns per unit of risk. Farmhouse is currently generating about -0.11 per unit of risk. If you would invest  107.00  in Phonex Inc on September 22, 2024 and sell it today you would earn a total of  10.00  from holding Phonex Inc or generate 9.35% return on investment over 90 days.

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

Phonex Inc  vs.  Farmhouse

Phonex Inc

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Phonex Inc are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak technical indicators, Phonex may actually be approaching a critical reversion point that can send shares even higher in January 2025.

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 unfluctuating performance in the last few months, the Stock's technical 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 Phonex and Farmhouse

The main advantage of trading using opposite Phonex and Farmhouse positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Phonex 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 Phonex Inc 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 Transaction History module to view history of all your transactions and understand their impact on performance.