Correlation Between Oriental Food and FARM FRESH
Can any of the company-specific risk be diversified away by investing in both Oriental Food and FARM FRESH 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 Oriental Food and FARM FRESH into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Oriental Food Industries and FARM FRESH BERHAD, you can compare the effects of market volatilities on Oriental Food and FARM FRESH 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 Oriental Food with a short position of FARM FRESH. Check out your portfolio center. Please also check ongoing floating volatility patterns of Oriental Food and FARM FRESH.
Diversification Opportunities for Oriental Food and FARM FRESH
-0.24 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Oriental and FARM is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding Oriental Food Industries and FARM FRESH BERHAD in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FARM FRESH BERHAD and Oriental Food 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 Oriental Food Industries are associated (or correlated) with FARM FRESH. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FARM FRESH BERHAD has no effect on the direction of Oriental Food i.e., Oriental Food and FARM FRESH go up and down completely randomly.
Pair Corralation between Oriental Food and FARM FRESH
Assuming the 90 days trading horizon Oriental Food Industries is expected to generate 1.58 times more return on investment than FARM FRESH. However, Oriental Food is 1.58 times more volatile than FARM FRESH BERHAD. It trades about 0.04 of its potential returns per unit of risk. FARM FRESH BERHAD is currently generating about 0.03 per unit of risk. If you would invest 119.00 in Oriental Food Industries on September 26, 2024 and sell it today you would earn a total of 41.00 from holding Oriental Food Industries or generate 34.45% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Insignificant |
Accuracy | 97.53% |
Values | Daily Returns |
Oriental Food Industries vs. FARM FRESH BERHAD
Performance |
Timeline |
Oriental Food Industries |
FARM FRESH BERHAD |
Oriental Food and FARM FRESH Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Oriental Food and FARM FRESH
The main advantage of trading using opposite Oriental Food and FARM FRESH positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Oriental Food position performs unexpectedly, FARM FRESH 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 FARM FRESH will offset losses from the drop in FARM FRESH's long position.Oriental Food vs. Nestle Bhd | Oriental Food vs. PPB Group Bhd | Oriental Food vs. IOI Bhd | Oriental Food vs. FGV Holdings Bhd |
FARM FRESH vs. Nestle Bhd | FARM FRESH vs. PPB Group Bhd | FARM FRESH vs. IOI Bhd | FARM FRESH vs. FGV Holdings Bhd |
Check out your portfolio center.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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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