Correlation Between Whole Earth and Farmmi

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

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

Diversification Opportunities for Whole Earth and Farmmi

-0.44

Correlation Coefficient

Whole Earth  Farmmi

Very good diversification

The 3 months correlation between Whole and Farmmi is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding Whole Earth Brands and Farmmi Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Farmmi Inc and Whole Earth 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 Whole Earth Brands are associated (or correlated) with Farmmi. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Farmmi Inc has no effect on the direction of Whole Earth i.e., Whole Earth and Farmmi go up and down completely randomly.

Pair Corralation between Whole Earth and Farmmi

Given the investment horizon of 90 days Whole Earth Brands is expected to generate 0.09 times more return on investment than Farmmi. However, Whole Earth Brands is 11.29 times less risky than Farmmi. It trades about -0.05 of its potential returns per unit of risk. Farmmi Inc is currently generating about -0.02 per unit of risk. If you would invest  483.00  in Whole Earth Brands on January 29, 2024 and sell it today you would lose (1.00) from holding Whole Earth Brands or give up 0.21% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Whole Earth Brands  vs.  Farmmi Inc

Whole Earth Brands

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Whole Earth Brands are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile technical and fundamental indicators, Whole Earth exhibited solid returns over the last few months and may actually be approaching a breakup point.

Farmmi Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Farmmi Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's primary indicators remain fairly strong which may send shares a bit higher in May 2024. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Pair Trading with Whole Earth and Farmmi

The main advantage of trading using opposite Whole Earth and Farmmi positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Whole Earth position performs unexpectedly, Farmmi 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 Farmmi will offset losses from the drop in Farmmi's long position.

The idea behind Whole Earth Brands and Farmmi Inc 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.