Correlation Between Farmer Bros and CHS
Can any of the company-specific risk be diversified away by investing in both Farmer Bros and CHS 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 CHS 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 CHS Inc CL, you can compare the effects of market volatilities on Farmer Bros and CHS 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 CHS. Check out your portfolio center. Please also check ongoing floating volatility patterns of Farmer Bros and CHS.
Diversification Opportunities for Farmer Bros and CHS
-0.91 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Farmer and CHS is -0.91. Overlapping area represents the amount of risk that can be diversified away by holding Farmer Bros Co and CHS Inc CL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CHS Inc CL 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 CHS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CHS Inc CL has no effect on the direction of Farmer Bros i.e., Farmer Bros and CHS go up and down completely randomly.
Pair Corralation between Farmer Bros and CHS
Given the investment horizon of 90 days Farmer Bros Co is expected to generate 9.96 times more return on investment than CHS. However, Farmer Bros is 9.96 times more volatile than CHS Inc CL. It trades about 0.17 of its potential returns per unit of risk. CHS Inc CL is currently generating about -0.2 per unit of risk. If you would invest 185.00 in Farmer Bros Co on September 2, 2024 and sell it today you would earn a total of 28.00 from holding Farmer Bros Co or generate 15.14% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Farmer Bros Co vs. CHS Inc CL
Performance |
| Timeline |
| Farmer Bros |
| CHS Inc CL |
Farmer Bros and CHS Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Farmer Bros and CHS
The main advantage of trading using opposite Farmer Bros and CHS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Farmer Bros position performs unexpectedly, CHS 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 CHS will offset losses from the drop in CHS'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 |
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 Stocks Directory module to find actively traded stocks across global markets.
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