Correlation Between Farmer Bros and Coffee Holding
Can any of the company-specific risk be diversified away by investing in both Farmer Bros and Coffee Holding 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 Coffee Holding 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 Coffee Holding Co, you can compare the effects of market volatilities on Farmer Bros and Coffee Holding 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 Coffee Holding. Check out your portfolio center. Please also check ongoing floating volatility patterns of Farmer Bros and Coffee Holding.
Diversification Opportunities for Farmer Bros and Coffee Holding
-0.81 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Farmer and Coffee is -0.81. Overlapping area represents the amount of risk that can be diversified away by holding Farmer Bros Co and Coffee Holding Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Coffee Holding 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 Coffee Holding. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Coffee Holding has no effect on the direction of Farmer Bros i.e., Farmer Bros and Coffee Holding go up and down completely randomly.
Pair Corralation between Farmer Bros and Coffee Holding
Given the investment horizon of 90 days Farmer Bros Co is expected to under-perform the Coffee Holding. But the stock apears to be less risky and, when comparing its historical volatility, Farmer Bros Co is 1.69 times less risky than Coffee Holding. The stock trades about -0.07 of its potential returns per unit of risk. The Coffee Holding Co is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest 132.00 in Coffee Holding Co on August 27, 2024 and sell it today you would earn a total of 217.00 from holding Coffee Holding Co or generate 164.39% 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. Coffee Holding Co
Performance |
| Timeline |
| Farmer Bros |
| Coffee Holding |
Farmer Bros and Coffee Holding Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Farmer Bros and Coffee Holding
The main advantage of trading using opposite Farmer Bros and Coffee Holding positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Farmer Bros position performs unexpectedly, Coffee Holding 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 Coffee Holding will offset losses from the drop in Coffee Holding'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 |
| Coffee Holding vs. Seneca Foods Corp | Coffee Holding vs. J J Snack | Coffee Holding vs. Aryzta AG PK | Coffee Holding vs. Lifeway Foods |
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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.
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