Correlation Between Farmer Bros and Wing Yip

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

Diversification Opportunities for Farmer Bros and Wing Yip

-0.41

Correlation Coefficient

Farmer Bros  Wing Yip

Very good diversification

The 3 months correlation between Farmer and Wing is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding Farmer Bros Co and Wing Yip Food in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wing Yip Food 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 Wing Yip. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wing Yip Food has no effect on the direction of Farmer Bros i.e., Farmer Bros and Wing Yip go up and down completely randomly.

Pair Corralation between Farmer Bros and Wing Yip

Given the investment horizon of 90 days Farmer Bros Co is expected to under-perform the Wing Yip. But the stock apears to be less risky and, when comparing its historical volatility, Farmer Bros Co is 54.75 times less risky than Wing Yip. The stock trades about -0.04 of its potential returns per unit of risk. The Wing Yip Food is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest  0.00  in Wing Yip Food on October 3, 2024 and sell it today you would earn a total of  600.00  from holding Wing Yip Food or generate 9.223372036854776E16% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	9.36%
Values	Daily Returns

Farmer Bros Co  vs.  Wing Yip Food

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 very healthy basic indicators, Farmer Bros is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Wing Yip Food

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Wing Yip Food are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite nearly conflicting technical indicators, Wing Yip reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Farmer Bros and Wing Yip

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

The idea behind Farmer Bros Co and Wing Yip Food 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.