Correlation Between J J and Farmer Bros

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

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

Diversification Opportunities for J J and Farmer Bros

-0.17

Correlation Coefficient

J J  Farmer Bros

Good diversification

The 3 months correlation between JJSF and Farmer is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding J J Snack and Farmer Bros Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Farmer Bros and J J 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 J J Snack are associated (or correlated) with Farmer Bros. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Farmer Bros has no effect on the direction of J J i.e., J J and Farmer Bros go up and down completely randomly.

Pair Corralation between J J and Farmer Bros

Given the investment horizon of 90 days J J Snack is expected to generate 0.33 times more return on investment than Farmer Bros. However, J J Snack is 3.0 times less risky than Farmer Bros. It trades about 0.03 of its potential returns per unit of risk. Farmer Bros Co is currently generating about -0.08 per unit of risk. If you would invest  16,984  in J J Snack on September 3, 2024 and sell it today you would earn a total of  395.00  from holding J J Snack or generate 2.33% return on investment over 90 days.

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

J J Snack  vs.  Farmer Bros Co

J J Snack

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in J J Snack are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, J J is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

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 unsteady performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with J J and Farmer Bros

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

The idea behind J J Snack and Farmer Bros 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.