Correlation Between Dole PLC and Farmer Bros

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

By analyzing existing cross correlation between Dole PLC and Farmer Bros Co, you can compare the effects of market volatilities on Dole PLC and Farmer Bros 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 Dole PLC with a short position of Farmer Bros. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dole PLC and Farmer Bros.

Diversification Opportunities for Dole PLC and Farmer Bros

0.66

Correlation Coefficient

Dole PLC  Farmer Bros

Poor diversification

The 3 months correlation between Dole and Farmer is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Dole PLC and Farmer Bros Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Farmer Bros and Dole PLC 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 Dole PLC are associated (or correlated) with Farmer Bros. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Farmer Bros has no effect on the direction of Dole PLC i.e., Dole PLC and Farmer Bros go up and down completely randomly.

Pair Corralation between Dole PLC and Farmer Bros

Given the investment horizon of 90 days Dole PLC is expected to generate 0.53 times more return on investment than Farmer Bros. However, Dole PLC is 1.87 times less risky than Farmer Bros. It trades about -0.17 of its potential returns per unit of risk. Farmer Bros Co is currently generating about -0.3 per unit of risk. If you would invest  1,464  in Dole PLC on January 7, 2025 and sell it today you would lose (105.00) from holding Dole PLC or give up 7.17% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Dole PLC  vs.  Farmer Bros Co

Dole PLC

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Dole PLC are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak essential indicators, Dole PLC may actually be approaching a critical reversion point that can send shares even higher in May 2025.

Farmer Bros

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Farmer Bros Co are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady basic indicators, Farmer Bros displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Dole PLC and Farmer Bros

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

The idea behind Dole PLC and Farmer Bros Co 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.