Correlation Between Digital Brands and Farmmi
Can any of the company-specific risk be diversified away by investing in both Digital Brands and Farmmi 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 Digital Brands and Farmmi into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Digital Brands Group and Farmmi Inc, you can compare the effects of market volatilities on Digital Brands and Farmmi 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 Digital Brands with a short position of Farmmi. Check out your portfolio center. Please also check ongoing floating volatility patterns of Digital Brands and Farmmi.
Diversification Opportunities for Digital Brands and Farmmi
-0.13 | Correlation Coefficient |
Good diversification
The 3 months correlation between Digital and Farmmi is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding Digital Brands Group and Farmmi Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Farmmi Inc and Digital Brands 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 Digital Brands Group are associated (or correlated) with Farmmi. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Farmmi Inc has no effect on the direction of Digital Brands i.e., Digital Brands and Farmmi go up and down completely randomly.
Pair Corralation between Digital Brands and Farmmi
Given the investment horizon of 90 days Digital Brands Group is expected to under-perform the Farmmi. In addition to that, Digital Brands is 2.6 times more volatile than Farmmi Inc. It trades about -0.42 of its total potential returns per unit of risk. Farmmi Inc is currently generating about 0.08 per unit of volatility. If you would invest 27.00 in Farmmi Inc on September 25, 2024 and sell it today you would earn a total of 1.81 from holding Farmmi Inc or generate 6.7% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Insignificant |
Accuracy | 100.0% |
Values | Daily Returns |
Digital Brands Group vs. Farmmi Inc
Performance |
Timeline |
Digital Brands Group |
Farmmi Inc |
Digital Brands and Farmmi Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Digital Brands and Farmmi
The main advantage of trading using opposite Digital Brands and Farmmi positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Digital Brands position performs unexpectedly, Farmmi 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 Farmmi will offset losses from the drop in Farmmi's long position.Digital Brands vs. Burlington Stores | Digital Brands vs. Urban Outfitters | Digital Brands vs. American Eagle Outfitters | Digital Brands vs. Childrens Place |
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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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