Correlation Between Farmers and Tejon Ranch

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

Diversification Opportunities for Farmers and Tejon Ranch

-0.77

Correlation Coefficient

Farmers  Tejon Ranch

Pay attention - limited upside

The 3 months correlation between Farmers and Tejon is -0.77. Overlapping area represents the amount of risk that can be diversified away by holding Farmers And Merchants and Tejon Ranch Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tejon Ranch 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 Tejon Ranch. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tejon Ranch has no effect on the direction of Farmers i.e., Farmers and Tejon Ranch go up and down completely randomly.

Pair Corralation between Farmers and Tejon Ranch

Given the investment horizon of 90 days Farmers And Merchants is expected to generate 0.39 times more return on investment than Tejon Ranch. However, Farmers And Merchants is 2.59 times less risky than Tejon Ranch. It trades about 0.32 of its potential returns per unit of risk. Tejon Ranch Co is currently generating about -0.09 per unit of risk. If you would invest  498,095  in Farmers And Merchants on September 12, 2024 and sell it today you would earn a total of  81,905  from holding Farmers And Merchants or generate 16.44% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.44%
Values	Daily Returns

Farmers And Merchants  vs.  Tejon Ranch Co

Farmers And Merchants

Risk-Adjusted Performance

25 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Farmers And Merchants are ranked lower than 25 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting fundamental drivers, Farmers disclosed solid returns over the last few months and may actually be approaching a breakup point.

Tejon Ranch

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Tejon Ranch Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Farmers and Tejon Ranch

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

The idea behind Farmers And Merchants and Tejon Ranch 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 Commodity Directory module to find actively traded commodities issued by global exchanges.