Correlation Between Farmmi and Central Garden
Can any of the company-specific risk be diversified away by investing in both Farmmi and Central Garden 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 Central Garden into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Farmmi Inc and Central Garden Pet, you can compare the effects of market volatilities on Farmmi and Central Garden 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 Central Garden. Check out your portfolio center. Please also check ongoing floating volatility patterns of Farmmi and Central Garden.
Diversification Opportunities for Farmmi and Central Garden
0.04 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Farmmi and Central is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding Farmmi Inc and Central Garden Pet in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Central Garden Pet 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 Central Garden. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Central Garden Pet has no effect on the direction of Farmmi i.e., Farmmi and Central Garden go up and down completely randomly.
Pair Corralation between Farmmi and Central Garden
Given the investment horizon of 90 days Farmmi Inc is expected to generate 1.24 times more return on investment than Central Garden. However, Farmmi is 1.24 times more volatile than Central Garden Pet. It trades about 0.01 of its potential returns per unit of risk. Central Garden Pet is currently generating about -0.05 per unit of risk. If you would invest 85.00 in Farmmi Inc on January 31, 2024 and sell it today you would earn a total of 0.00 from holding Farmmi Inc or generate 0.0% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Insignificant |
Accuracy | 100.0% |
Values | Daily Returns |
Farmmi Inc vs. Central Garden Pet
Performance |
Timeline |
Farmmi Inc |
Central Garden Pet |
Farmmi and Central Garden Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Farmmi and Central Garden
The main advantage of trading using opposite Farmmi and Central Garden positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Farmmi position performs unexpectedly, Central Garden 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 Central Garden will offset losses from the drop in Central Garden's long position.Farmmi vs. Golden Agri Resources | Farmmi vs. Fresh Del Monte | Farmmi vs. Alico Inc | Farmmi vs. SW Seed Company |
Central Garden vs. Unilever PLC ADR | Central Garden vs. Estee Lauder Companies | Central Garden vs. ELF Beauty | Central Garden vs. Coty Inc |
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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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