Correlation Between Farmmi and Archer Daniels

Can any of the company-specific risk be diversified away by investing in both Farmmi and Archer Daniels 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 Farmmi and Archer Daniels into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Farmmi Inc and Archer Daniels Midland, you can compare the effects of market volatilities on Farmmi and Archer Daniels 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 Farmmi with a short position of Archer Daniels. Check out your portfolio center. Please also check ongoing floating volatility patterns of Farmmi and Archer Daniels.

Diversification Opportunities for Farmmi and Archer Daniels

-0.47

Correlation Coefficient

Farmmi  Archer Daniels

Very good diversification

The 3 months correlation between Farmmi and Archer is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding Farmmi Inc and Archer Daniels Midland in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Archer Daniels Midland and Farmmi 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 Farmmi Inc are associated (or correlated) with Archer Daniels. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Archer Daniels Midland has no effect on the direction of Farmmi i.e., Farmmi and Archer Daniels go up and down completely randomly.

Pair Corralation between Farmmi and Archer Daniels

Given the investment horizon of 90 days Farmmi Inc is expected to generate 5.24 times more return on investment than Archer Daniels. However, Farmmi is 5.24 times more volatile than Archer Daniels Midland. It trades about 0.1 of its potential returns per unit of risk. Archer Daniels Midland is currently generating about -0.1 per unit of risk. If you would invest  21.00  in Farmmi Inc on August 30, 2024 and sell it today you would earn a total of  8.00  from holding Farmmi Inc or generate 38.1% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Farmmi Inc  vs.  Archer Daniels Midland

Farmmi Inc

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Farmmi Inc are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite fairly fragile primary indicators, Farmmi demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Archer Daniels Midland

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Archer Daniels Midland has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's fundamental indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with Farmmi and Archer Daniels

The main advantage of trading using opposite Farmmi and Archer Daniels positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Farmmi position performs unexpectedly, Archer Daniels 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 Archer Daniels will offset losses from the drop in Archer Daniels' long position.

The idea behind Farmmi Inc and Archer Daniels Midland 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.

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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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.