Correlation Between Innovate Corp and Farmers

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

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

Diversification Opportunities for Innovate Corp and Farmers

-0.42

Correlation Coefficient

Innovate Corp  Farmers

Very good diversification

The 3 months correlation between Innovate and Farmers is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding Innovate Corp 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 Innovate Corp 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 Innovate Corp 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 Innovate Corp i.e., Innovate Corp and Farmers go up and down completely randomly.

Pair Corralation between Innovate Corp and Farmers

Given the investment horizon of 90 days Innovate Corp is expected to under-perform the Farmers. But the stock apears to be less risky and, when comparing its historical volatility, Innovate Corp is 1.31 times less risky than Farmers. The stock trades about -0.14 of its potential returns per unit of risk. The Farmers and Merchants is currently generating about 0.28 of returns per unit of risk over similar time horizon. If you would invest  1,383  in Farmers and Merchants on September 27, 2024 and sell it today you would earn a total of  417.00  from holding Farmers and Merchants or generate 30.15% return on investment over 90 days.

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

Innovate Corp  vs.  Farmers and Merchants

Innovate Corp

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Innovate Corp are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak basic indicators, Innovate Corp exhibited solid returns over the last few months and may actually be approaching a breakup point.

Farmers and Merchants

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Farmers and Merchants are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak technical and fundamental indicators, Farmers reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Innovate Corp and Farmers

The main advantage of trading using opposite Innovate Corp and Farmers positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Innovate Corp 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 Innovate Corp 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.