Correlation Between Farmmi and Better Choice
Can any of the company-specific risk be diversified away by investing in both Farmmi and Better Choice 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 Better Choice into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Farmmi Inc and Better Choice, you can compare the effects of market volatilities on Farmmi and Better Choice 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 Better Choice. Check out your portfolio center. Please also check ongoing floating volatility patterns of Farmmi and Better Choice.
Diversification Opportunities for Farmmi and Better Choice
-0.6 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Farmmi and Better is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding Farmmi Inc and Better Choice in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Better Choice 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 Better Choice. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Better Choice has no effect on the direction of Farmmi i.e., Farmmi and Better Choice go up and down completely randomly.
Pair Corralation between Farmmi and Better Choice
Given the investment horizon of 90 days Farmmi Inc is expected to under-perform the Better Choice. In addition to that, Farmmi is 1.13 times more volatile than Better Choice. It trades about -0.05 of its total potential returns per unit of risk. Better Choice is currently generating about -0.04 per unit of volatility. If you would invest 403.00 in Better Choice on August 29, 2024 and sell it today you would lose (207.00) from holding Better Choice or give up 51.36% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Farmmi Inc vs. Better Choice
Performance |
| Timeline |
| Farmmi Inc |
| Better Choice |
Farmmi and Better Choice Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Farmmi and Better Choice
The main advantage of trading using opposite Farmmi and Better Choice positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Farmmi position performs unexpectedly, Better Choice 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 Better Choice will offset losses from the drop in Better Choice's long position.The idea behind Farmmi Inc and Better Choice 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.| Better Choice vs. Blue Star Foods | Better Choice vs. Stryve Foods | Better Choice vs. BioAdaptives | Better Choice vs. Beyond Oil |
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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.
Other Complementary Tools
| Price Ceiling Movement Calculate and plot Price Ceiling Movement for different equity instruments | |
| Bond Analysis Evaluate and analyze corporate bonds as a potential investment for your portfolios. | |
| Funds Screener Find actively-traded funds from around the world traded on over 30 global exchanges | |
| Portfolio Diagnostics Use generated alerts and portfolio events aggregator to diagnose current holdings | |
| Bonds Directory Find actively traded corporate debentures issued by US companies |