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
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
Performance |
Timeline |
Farmers And Merchants |
Limoneira |
Farmers and Limoneira Volatility Contrast
Predicted Return Density |
Returns |
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.Farmers vs. First National Bank | Farmers vs. Farmers Merchants Bancorp | Farmers vs. Exchange Bank | Farmers vs. First National of |
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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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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