Correlation Between FARM and RSR

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

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

Diversification Opportunities for FARM and RSR

0.96

Correlation Coefficient

FARM  RSR

Almost no diversification

The 3 months correlation between FARM and RSR is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding FARM and RSR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RSR and FARM 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 FARM are associated (or correlated) with RSR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RSR has no effect on the direction of FARM i.e., FARM and RSR go up and down completely randomly.

Pair Corralation between FARM and RSR

Assuming the 90 days trading horizon FARM is expected to generate 0.62 times more return on investment than RSR. However, FARM is 1.61 times less risky than RSR. It trades about -0.11 of its potential returns per unit of risk. RSR is currently generating about -0.09 per unit of risk. If you would invest  4,639  in FARM on December 28, 2024 and sell it today you would lose (1,515) from holding FARM or give up 32.66% of portfolio value over 90 days.

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

FARM  vs.  RSR

FARM

Risk-Adjusted Performance

Very Weak

Over the last 90 days FARM has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Crypto's fundamental indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for FARM shareholders.

RSR

Risk-Adjusted Performance

Very Weak

Over the last 90 days RSR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Crypto's basic indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for RSR shareholders.

Pair Trading with FARM and RSR

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

The idea behind FARM and RSR 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.