Correlation Between Wing Yip and Farmer Bros

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

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

Diversification Opportunities for Wing Yip and Farmer Bros

-0.56

Correlation Coefficient

Wing Yip  Farmer Bros

Excellent diversification

The 3 months correlation between Wing and Farmer is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding Wing Yip Food and Farmer Bros Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Farmer Bros and Wing Yip 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 Wing Yip Food 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 Wing Yip i.e., Wing Yip and Farmer Bros go up and down completely randomly.

Pair Corralation between Wing Yip and Farmer Bros

Given the investment horizon of 90 days Wing Yip Food is expected to generate 3.25 times more return on investment than Farmer Bros. However, Wing Yip is 3.25 times more volatile than Farmer Bros Co. It trades about 0.06 of its potential returns per unit of risk. Farmer Bros Co is currently generating about -0.26 per unit of risk. If you would invest  450.00  in Wing Yip Food on October 6, 2024 and sell it today you would earn a total of  13.00  from holding Wing Yip Food or generate 2.89% return on investment over 90 days.

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

Wing Yip Food  vs.  Farmer Bros Co

Wing Yip Food

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Wing Yip Food are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite nearly conflicting technical indicators, Wing Yip reported solid returns over the last few months and may actually be approaching a breakup point.

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 latest unsteady performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with Wing Yip and Farmer Bros

The main advantage of trading using opposite Wing Yip and Farmer Bros positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Wing Yip 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 Wing Yip Food 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.