Correlation Between Farmmi and Lamb Weston
Can any of the company-specific risk be diversified away by investing in both Farmmi and Lamb Weston 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 Farmmi and Lamb Weston into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Farmmi Inc and Lamb Weston Holdings, you can compare the effects of market volatilities on Farmmi and Lamb Weston 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 Farmmi with a short position of Lamb Weston. Check out your portfolio center. Please also check ongoing floating volatility patterns of Farmmi and Lamb Weston.
Diversification Opportunities for Farmmi and Lamb Weston
0.48 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Farmmi and Lamb is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Farmmi Inc and Lamb Weston Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lamb Weston Holdings and Farmmi 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 Farmmi Inc are associated (or correlated) with Lamb Weston. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lamb Weston Holdings has no effect on the direction of Farmmi i.e., Farmmi and Lamb Weston go up and down completely randomly.
Pair Corralation between Farmmi and Lamb Weston
Given the investment horizon of 90 days Farmmi Inc is expected to generate 0.72 times more return on investment than Lamb Weston. However, Farmmi Inc is 1.39 times less risky than Lamb Weston. It trades about -0.15 of its potential returns per unit of risk. Lamb Weston Holdings is currently generating about -0.22 per unit of risk. If you would invest 92.00 in Farmmi Inc on January 21, 2024 and sell it today you would lose (10.00) from holding Farmmi Inc or give up 10.87% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Weak |
Accuracy | 100.0% |
Values | Daily Returns |
Farmmi Inc vs. Lamb Weston Holdings
Performance |
Timeline |
Farmmi Inc |
Lamb Weston Holdings |
Farmmi and Lamb Weston Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Farmmi and Lamb Weston
The main advantage of trading using opposite Farmmi and Lamb Weston positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Farmmi position performs unexpectedly, Lamb Weston 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 Lamb Weston will offset losses from the drop in Lamb Weston's long position.Farmmi vs. Green Globe International | Farmmi vs. Greenlane Holdings | Farmmi vs. 22nd Century Group | Farmmi vs. 1606 Corp |
Lamb Weston vs. Green Globe International | Lamb Weston vs. Greenlane Holdings | Lamb Weston vs. 22nd Century Group | Lamb Weston vs. 1606 Corp |
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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.
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