Correlation Between FarmStory and System
Can any of the company-specific risk be diversified away by investing in both FarmStory and System 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 FarmStory and System into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between FarmStory Co and System and Application, you can compare the effects of market volatilities on FarmStory and System 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 FarmStory with a short position of System. Check out your portfolio center. Please also check ongoing floating volatility patterns of FarmStory and System.
Diversification Opportunities for FarmStory and System
Poor diversification
The 3 months correlation between FarmStory and System is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding FarmStory Co and System and Application in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on System and Application and FarmStory 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 FarmStory Co are associated (or correlated) with System. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of System and Application has no effect on the direction of FarmStory i.e., FarmStory and System go up and down completely randomly.
Pair Corralation between FarmStory and System
Assuming the 90 days trading horizon FarmStory Co is expected to under-perform the System. But the stock apears to be less risky and, when comparing its historical volatility, FarmStory Co is 1.3 times less risky than System. The stock trades about -0.17 of its potential returns per unit of risk. The System and Application is currently generating about -0.11 of returns per unit of risk over similar time horizon. If you would invest 152,100 in System and Application on September 10, 2024 and sell it today you would lose (22,600) from holding System and Application or give up 14.86% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 100.0% |
Values | Daily Returns |
FarmStory Co vs. System and Application
Performance |
Timeline |
FarmStory |
System and Application |
FarmStory and System Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with FarmStory and System
The main advantage of trading using opposite FarmStory and System positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if FarmStory position performs unexpectedly, System 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 System will offset losses from the drop in System's long position.FarmStory vs. Sungmoon Electronics Co | FarmStory vs. Sangshin Electronics Co | FarmStory vs. iNtRON Biotechnology | FarmStory vs. Seoul Food Industrial |
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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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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