Correlation Between Farmer Bros and BG Foods
Can any of the company-specific risk be diversified away by investing in both Farmer Bros and BG Foods 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 Farmer Bros and BG Foods into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Farmer Bros Co and BG Foods, you can compare the effects of market volatilities on Farmer Bros and BG Foods 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 Farmer Bros with a short position of BG Foods. Check out your portfolio center. Please also check ongoing floating volatility patterns of Farmer Bros and BG Foods.
Diversification Opportunities for Farmer Bros and BG Foods
0.1 | Correlation Coefficient |
Average diversification
The 3 months correlation between Farmer and BGS is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding Farmer Bros Co and BG Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BG Foods and Farmer Bros 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 Farmer Bros Co are associated (or correlated) with BG Foods. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BG Foods has no effect on the direction of Farmer Bros i.e., Farmer Bros and BG Foods go up and down completely randomly.
Pair Corralation between Farmer Bros and BG Foods
Given the investment horizon of 90 days Farmer Bros Co is expected to generate 0.92 times more return on investment than BG Foods. However, Farmer Bros Co is 1.08 times less risky than BG Foods. It trades about 0.14 of its potential returns per unit of risk. BG Foods is currently generating about -0.21 per unit of risk. If you would invest 198.00 in Farmer Bros Co on August 28, 2024 and sell it today you would earn a total of 25.00 from holding Farmer Bros Co or generate 12.63% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Farmer Bros Co vs. BG Foods
Performance |
| Timeline |
| Farmer Bros |
| BG Foods |
Farmer Bros and BG Foods Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Farmer Bros and BG Foods
The main advantage of trading using opposite Farmer Bros and BG Foods positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Farmer Bros position performs unexpectedly, BG Foods 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 BG Foods will offset losses from the drop in BG Foods' long position.| Farmer Bros vs. Bridgford Foods | Farmer Bros vs. Seneca Foods Corp | Farmer Bros vs. Lifeway Foods | Farmer Bros vs. J J Snack |
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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.
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