Correlation Between Farmer Bros and Central Garden
Can any of the company-specific risk be diversified away by investing in both Farmer Bros and Central Garden 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 Central Garden 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 Central Garden Pet, you can compare the effects of market volatilities on Farmer Bros and Central Garden 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 Central Garden. Check out your portfolio center. Please also check ongoing floating volatility patterns of Farmer Bros and Central Garden.
Diversification Opportunities for Farmer Bros and Central Garden
0.68 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Farmer and Central is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Farmer Bros Co and Central Garden Pet in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Central Garden Pet 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 Central Garden. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Central Garden Pet has no effect on the direction of Farmer Bros i.e., Farmer Bros and Central Garden go up and down completely randomly.
Pair Corralation between Farmer Bros and Central Garden
Given the investment horizon of 90 days Farmer Bros Co is expected to under-perform the Central Garden. In addition to that, Farmer Bros is 2.15 times more volatile than Central Garden Pet. It trades about -0.05 of its total potential returns per unit of risk. Central Garden Pet is currently generating about -0.02 per unit of volatility. If you would invest 3,616 in Central Garden Pet on September 2, 2024 and sell it today you would lose (237.00) from holding Central Garden Pet or give up 6.55% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Farmer Bros Co vs. Central Garden Pet
Performance |
| Timeline |
| Farmer Bros |
| Central Garden Pet |
Farmer Bros and Central Garden Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Farmer Bros and Central Garden
The main advantage of trading using opposite Farmer Bros and Central Garden positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Farmer Bros position performs unexpectedly, Central Garden 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 Central Garden will offset losses from the drop in Central Garden's long position.| Farmer Bros vs. Bridgford Foods | Farmer Bros vs. Seneca Foods Corp | Farmer Bros vs. Lifeway Foods | Farmer Bros vs. J J Snack |
| Central Garden vs. Seneca Foods Corp | Central Garden vs. Seneca Foods Corp | Central Garden vs. Natures Sunshine Products | Central Garden 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.
Other Complementary Tools
| Portfolio Rebalancing Analyze risk-adjusted returns against different time horizons to find asset-allocation targets | |
| Equity Search Search for actively traded equities including funds and ETFs from over 30 global markets | |
| Portfolio Anywhere Track or share privately all of your investments from the convenience of any device | |
| Financial Widgets Easily integrated Macroaxis content with over 30 different plug-and-play financial widgets | |
| Insider Screener Find insiders across different sectors to evaluate their impact on performance |