Correlation Between Lamb Weston and Farmer Bros
Can any of the company-specific risk be diversified away by investing in both Lamb Weston 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 Lamb Weston and Farmer Bros into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Lamb Weston Holdings and Farmer Bros Co, you can compare the effects of market volatilities on Lamb Weston 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 Lamb Weston with a short position of Farmer Bros. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lamb Weston and Farmer Bros.
Diversification Opportunities for Lamb Weston and Farmer Bros
0.35 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Lamb and Farmer is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Lamb Weston Holdings and Farmer Bros Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Farmer Bros and Lamb Weston 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 Lamb Weston Holdings 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 Lamb Weston i.e., Lamb Weston and Farmer Bros go up and down completely randomly.
Pair Corralation between Lamb Weston and Farmer Bros
Allowing for the 90-day total investment horizon Lamb Weston Holdings is expected to under-perform the Farmer Bros. In addition to that, Lamb Weston is 2.15 times more volatile than Farmer Bros Co. It trades about -0.23 of its total potential returns per unit of risk. Farmer Bros Co is currently generating about -0.08 per unit of volatility. If you would invest 335.00 in Farmer Bros Co on January 20, 2024 and sell it today you would lose (14.00) from holding Farmer Bros Co or give up 4.18% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Lamb Weston Holdings vs. Farmer Bros Co
Performance |
| Timeline |
| Lamb Weston Holdings |
| Farmer Bros |
Lamb Weston and Farmer Bros Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lamb Weston and Farmer Bros
The main advantage of trading using opposite Lamb Weston and Farmer Bros positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lamb Weston 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.| Lamb Weston vs. Green Globe International | Lamb Weston vs. Greenlane Holdings | Lamb Weston vs. 22nd Century Group | Lamb Weston vs. 1606 Corp |
| Farmer Bros vs. Green Globe International | Farmer Bros vs. Greenlane Holdings | Farmer Bros vs. 22nd Century Group | Farmer Bros vs. 1606 Corp |
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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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