Correlation Between Farmer Bros and Maison Solutions

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

Diversification Opportunities for Farmer Bros and Maison Solutions

-0.53

Correlation Coefficient

Farmer Bros  Maison Solutions

Excellent diversification

The 3 months correlation between Farmer and Maison is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding Farmer Bros Co and Maison Solutions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Maison Solutions 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 Maison Solutions. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Maison Solutions has no effect on the direction of Farmer Bros i.e., Farmer Bros and Maison Solutions go up and down completely randomly.

Pair Corralation between Farmer Bros and Maison Solutions

Given the investment horizon of 90 days Farmer Bros Co is expected to under-perform the Maison Solutions. But the stock apears to be less risky and, when comparing its historical volatility, Farmer Bros Co is 4.0 times less risky than Maison Solutions. The stock trades about -0.08 of its potential returns per unit of risk. The Maison Solutions is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  100.00  in Maison Solutions on September 3, 2024 and sell it today you would lose (6.00) from holding Maison Solutions or give up 6.0% of portfolio value over 90 days.

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

Farmer Bros Co  vs.  Maison Solutions

Farmer Bros

Risk-Adjusted Performance

0 of 100

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 unsteady performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Maison Solutions

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Maison Solutions are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Maison Solutions unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Farmer Bros and Maison Solutions

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

The idea behind Farmer Bros Co and Maison Solutions 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.