Correlation Between Farmer Bros and Molson Coors

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Can any of the company-specific risk be diversified away by investing in both Farmer Bros and Molson Coors 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 Molson Coors 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 Molson Coors Beverage, you can compare the effects of market volatilities on Farmer Bros and Molson Coors 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 Molson Coors. Check out your portfolio center. Please also check ongoing floating volatility patterns of Farmer Bros and Molson Coors.

Diversification Opportunities for Farmer Bros and Molson Coors

-0.34
  Correlation Coefficient

Very good diversification

The 3 months correlation between Farmer and Molson is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding Farmer Bros Co and Molson Coors Beverage in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Molson Coors Beverage 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 Molson Coors. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Molson Coors Beverage has no effect on the direction of Farmer Bros i.e., Farmer Bros and Molson Coors go up and down completely randomly.

Pair Corralation between Farmer Bros and Molson Coors

Given the investment horizon of 90 days Farmer Bros Co is expected to under-perform the Molson Coors. In addition to that, Farmer Bros is 2.22 times more volatile than Molson Coors Beverage. It trades about -0.01 of its total potential returns per unit of risk. Molson Coors Beverage is currently generating about 0.0 per unit of volatility. If you would invest  6,218  in Molson Coors Beverage on August 24, 2024 and sell it today you would lose (218.00) from holding Molson Coors Beverage or give up 3.51% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy99.6%
ValuesDaily Returns

Farmer Bros Co  vs.  Molson Coors Beverage

 Performance 
       Timeline  
Farmer Bros 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Farmer Bros Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in December 2024. The recent disarray may also be a sign of long period up-swing for the firm investors.
Molson Coors Beverage 

Risk-Adjusted Performance

4 of 100

 
Weak
 
Strong
Insignificant
Compared to the overall equity markets, risk-adjusted returns on investments in Molson Coors Beverage are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Molson Coors is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Farmer Bros and Molson Coors Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Farmer Bros and Molson Coors

The main advantage of trading using opposite Farmer Bros and Molson Coors positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Farmer Bros position performs unexpectedly, Molson Coors 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 Molson Coors will offset losses from the drop in Molson Coors' long position.
The idea behind Farmer Bros Co and Molson Coors Beverage 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.
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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.

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