Correlation Between Farmers and Limoneira

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

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

Diversification Opportunities for Farmers and Limoneira

-0.57

Correlation Coefficient

Farmers  Limoneira

Excellent diversification

The 3 months correlation between Farmers and Limoneira is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding Farmers And Merchants and Limoneira Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Limoneira and Farmers 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 Farmers And Merchants are associated (or correlated) with Limoneira. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Limoneira has no effect on the direction of Farmers i.e., Farmers and Limoneira go up and down completely randomly.

Pair Corralation between Farmers and Limoneira

Given the investment horizon of 90 days Farmers And Merchants is expected to generate 0.2 times more return on investment than Limoneira. However, Farmers And Merchants is 5.07 times less risky than Limoneira. It trades about 0.03 of its potential returns per unit of risk. Limoneira Co is currently generating about -0.19 per unit of risk. If you would invest  567,245  in Farmers And Merchants on December 29, 2024 and sell it today you would earn a total of  4,755  from holding Farmers And Merchants or generate 0.84% return on investment over 90 days.

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

Farmers And Merchants  vs.  Limoneira Co

Farmers And Merchants

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Farmers And Merchants are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent fundamental drivers, Farmers is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Limoneira

Risk-Adjusted Performance

Very Weak

Over the last 90 days Limoneira Co has generated negative risk-adjusted returns adding no value to investors with long positions. Even with unsteady performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in April 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Pair Trading with Farmers and Limoneira

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

The idea behind Farmers And Merchants and Limoneira Co 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.