Correlation Between SpringBig Holdings and Farmers Edge

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

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

Diversification Opportunities for SpringBig Holdings and Farmers Edge

-0.35

Correlation Coefficient

SpringBig Holdings  Farmers Edge

Very good diversification

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

Pair Corralation between SpringBig Holdings and Farmers Edge

Given the investment horizon of 90 days SpringBig Holdings is expected to under-perform the Farmers Edge. In addition to that, SpringBig Holdings is 2.09 times more volatile than Farmers Edge. It trades about -0.05 of its total potential returns per unit of risk. Farmers Edge is currently generating about -0.05 per unit of volatility. 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 Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

SpringBig Holdings  vs.  Farmers Edge

SpringBig Holdings

Risk-Adjusted Performance

0 of 100

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

Risk-Adjusted Performance

0 of 100

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.

Pair Trading with SpringBig Holdings and Farmers Edge

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

The idea behind SpringBig Holdings and Farmers Edge 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.