Correlation Between John B and Farmer Bros
Can any of the company-specific risk be diversified away by investing in both John B 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 John B and Farmer Bros into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between John B Sanfilippo and Farmer Bros Co, you can compare the effects of market volatilities on John B 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 John B with a short position of Farmer Bros. Check out your portfolio center. Please also check ongoing floating volatility patterns of John B and Farmer Bros.
Diversification Opportunities for John B and Farmer Bros
0.25 | Correlation Coefficient |
Modest diversification
The 3 months correlation between John and Farmer is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding John B Sanfilippo and Farmer Bros Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Farmer Bros and John B 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 John B Sanfilippo 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 John B i.e., John B and Farmer Bros go up and down completely randomly.
Pair Corralation between John B and Farmer Bros
Given the investment horizon of 90 days John B Sanfilippo is expected to generate 0.59 times more return on investment than Farmer Bros. However, John B Sanfilippo is 1.71 times less risky than Farmer Bros. It trades about -0.15 of its potential returns per unit of risk. Farmer Bros Co is currently generating about -0.18 per unit of risk. If you would invest 10,458 in John B Sanfilippo on January 26, 2024 and sell it today you would lose (423.00) from holding John B Sanfilippo or give up 4.04% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
John B Sanfilippo vs. Farmer Bros Co
Performance |
| Timeline |
| John B Sanfilippo |
| Farmer Bros |
John B and Farmer Bros Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with John B and Farmer Bros
The main advantage of trading using opposite John B and Farmer Bros positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if John B 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.| John B vs. Lancaster Colony | John B vs. Treehouse Foods | John B vs. Seneca Foods Corp | John B vs. Seneca Foods Corp |
| Farmer Bros vs. Bridgford Foods | Farmer Bros vs. Seneca Foods Corp | Farmer Bros vs. Lifeway Foods | Farmer Bros vs. J J Snack |
Check out your portfolio center.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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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