Correlation Between BG Foods and Farmmi
Can any of the company-specific risk be diversified away by investing in both BG Foods 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 BG Foods and Farmmi into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between BG Foods and Farmmi Inc, you can compare the effects of market volatilities on BG Foods 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 BG Foods with a short position of Farmmi. Check out your portfolio center. Please also check ongoing floating volatility patterns of BG Foods and Farmmi.
Diversification Opportunities for BG Foods and Farmmi
Good diversification
The 3 months correlation between BGS and Farmmi is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding BG Foods and Farmmi Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Farmmi Inc and BG Foods 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 BG Foods 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 BG Foods i.e., BG Foods and Farmmi go up and down completely randomly.
Pair Corralation between BG Foods and Farmmi
Considering the 90-day investment horizon BG Foods is expected to generate 0.36 times more return on investment than Farmmi. However, BG Foods is 2.78 times less risky than Farmmi. It trades about -0.07 of its potential returns per unit of risk. Farmmi Inc is currently generating about -0.05 per unit of risk. If you would invest 916.00 in BG Foods on September 2, 2024 and sell it today you would lose (248.00) from holding BG Foods or give up 27.07% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
BG Foods vs. Farmmi Inc
Performance |
| Timeline |
| BG Foods |
| Farmmi Inc |
BG Foods and Farmmi Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BG Foods and Farmmi
The main advantage of trading using opposite BG Foods and Farmmi positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BG Foods 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 BG Foods 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.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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
Other Complementary Tools
| Commodity Channel Use Commodity Channel Index to analyze current equity momentum | |
| Idea Analyzer Analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas | |
| Stock Tickers Use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites | |
| Investing Opportunities Build portfolios using our predefined set of ideas and optimize them against your investing preferences | |
| Portfolio Volatility Check portfolio volatility and analyze historical return density to properly model market risk |