Correlation Between Tejon Ranch and Farmers

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

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

Diversification Opportunities for Tejon Ranch and Farmers

-0.77

Correlation Coefficient

Tejon Ranch  Farmers

Pay attention - limited upside

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

Pair Corralation between Tejon Ranch and Farmers

Considering the 90-day investment horizon Tejon Ranch Co is expected to under-perform the Farmers. In addition to that, Tejon Ranch is 2.0 times more volatile than Farmers And Merchants. It trades about -0.23 of its total potential returns per unit of risk. Farmers And Merchants is currently generating about 0.2 per unit of volatility. If you would invest  558,313  in Farmers And Merchants on September 12, 2024 and sell it today you would earn a total of  21,687  from holding Farmers And Merchants or generate 3.88% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	95.45%
Values	Daily Returns

Tejon Ranch Co  vs.  Farmers And Merchants

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.

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.

Pair Trading with Tejon Ranch and Farmers

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

The idea behind Tejon Ranch Co and Farmers And Merchants 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.