Correlation Between Farmers Edge and SpringBig Holdings

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Can any of the company-specific risk be diversified away by investing in both Farmers Edge and SpringBig Holdings 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 Edge and SpringBig Holdings into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Farmers Edge and SpringBig Holdings, you can compare the effects of market volatilities on Farmers Edge and SpringBig Holdings 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 Edge with a short position of SpringBig Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Farmers Edge and SpringBig Holdings.

Diversification Opportunities for Farmers Edge and SpringBig Holdings

-0.35
  Correlation Coefficient

Very good diversification

The 3 months correlation between Farmers and SpringBig is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding Farmers Edge and SpringBig Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SpringBig Holdings and Farmers Edge 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 Edge are associated (or correlated) with SpringBig Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SpringBig Holdings has no effect on the direction of Farmers Edge i.e., Farmers Edge and SpringBig Holdings go up and down completely randomly.

Pair Corralation between Farmers Edge and SpringBig Holdings

Assuming the 90 days horizon Farmers Edge is expected to generate 0.48 times more return on investment than SpringBig Holdings. However, Farmers Edge is 2.09 times less risky than SpringBig Holdings. It trades about -0.05 of its potential returns per unit of risk. SpringBig Holdings is currently generating about -0.05 per unit of risk. If you would invest  19.00  in Farmers Edge on October 5, 2024 and sell it today you would lose (5.00) from holding Farmers Edge or give up 26.32% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Farmers Edge  vs.  SpringBig Holdings

 Performance 
       Timeline  
Farmers Edge 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Farmers Edge has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical and fundamental indicators, Farmers Edge is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.
SpringBig Holdings 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days SpringBig Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable forward indicators, SpringBig Holdings is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Farmers Edge and SpringBig Holdings Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Farmers Edge and SpringBig Holdings

The main advantage of trading using opposite Farmers Edge and SpringBig Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Farmers Edge position performs unexpectedly, SpringBig Holdings 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 SpringBig Holdings will offset losses from the drop in SpringBig Holdings' long position.
The idea behind Farmers Edge and SpringBig Holdings 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.

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