Correlation Between First Farmers and Lancaster Colony

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

By analyzing existing cross correlation between First Farmers Financial and Lancaster Colony, you can compare the effects of market volatilities on First Farmers and Lancaster Colony 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 First Farmers with a short position of Lancaster Colony. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Farmers and Lancaster Colony.

Diversification Opportunities for First Farmers and Lancaster Colony

0.04

Correlation Coefficient

First Farmers  Lancaster Colony

Significant diversification

The 3 months correlation between First and Lancaster is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding First Farmers Financial and Lancaster Colony in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lancaster Colony and First Farmers 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 First Farmers Financial are associated (or correlated) with Lancaster Colony. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lancaster Colony has no effect on the direction of First Farmers i.e., First Farmers and Lancaster Colony go up and down completely randomly.

Pair Corralation between First Farmers and Lancaster Colony

Given the investment horizon of 90 days First Farmers is expected to generate 5.12 times less return on investment than Lancaster Colony. But when comparing it to its historical volatility, First Farmers Financial is 2.16 times less risky than Lancaster Colony. It trades about 0.06 of its potential returns per unit of risk. Lancaster Colony is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  16,053  in Lancaster Colony on May 5, 2025 and sell it today you would earn a total of  1,224  from holding Lancaster Colony or generate 7.62% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	63.49%
Values	Daily Returns

First Farmers Financial  vs.  Lancaster Colony

First Farmers Financial

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in First Farmers Financial are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable primary indicators, First Farmers is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Lancaster Colony

Risk-Adjusted Performance

Good

Over the last 90 days Lancaster Colony has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather uncertain basic indicators, Lancaster Colony may actually be approaching a critical reversion point that can send shares even higher in September 2025.

Pair Trading with First Farmers and Lancaster Colony

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

The idea behind First Farmers Financial and Lancaster Colony 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.