Correlation Between Seaboard and Farmers

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

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

Diversification Opportunities for Seaboard and Farmers

0.87

Correlation Coefficient

Seaboard  Farmers

Very poor diversification

The 3 months correlation between Seaboard and Farmers is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Seaboard 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 Seaboard 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 Seaboard 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 Seaboard i.e., Seaboard and Farmers go up and down completely randomly.

Pair Corralation between Seaboard and Farmers

Considering the 90-day investment horizon Seaboard is expected to under-perform the Farmers. But the stock apears to be less risky and, when comparing its historical volatility, Seaboard is 2.3 times less risky than Farmers. The stock trades about -0.23 of its potential returns per unit of risk. The Farmers And Merchants is currently generating about -0.07 of returns per unit of risk over similar time horizon. If you would invest  457,500  in Farmers And Merchants on January 20, 2024 and sell it today you would lose (17,500) from holding Farmers And Merchants or give up 3.83% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	100.0%
Values	Daily Returns

Seaboard  vs.  Farmers And Merchants

Seaboard

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Seaboard has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's technical and fundamental indicators remain somewhat strong which may send shares a bit higher in May 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

Farmers And Merchants

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Farmers And Merchants has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's fundamental drivers remain quite persistent which may send shares a bit higher in May 2024. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with Seaboard and Farmers

The main advantage of trading using opposite Seaboard and Farmers positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Seaboard 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 Seaboard 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.