Correlation Between Farmmi and Grand Havana

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

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

Diversification Opportunities for Farmmi and Grand Havana

-0.36

Correlation Coefficient

Farmmi  Grand Havana

Very good diversification

The 3 months correlation between Farmmi and Grand is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding Farmmi Inc and Grand Havana in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Grand Havana and Farmmi 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 Farmmi Inc are associated (or correlated) with Grand Havana. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Grand Havana has no effect on the direction of Farmmi i.e., Farmmi and Grand Havana go up and down completely randomly.

Pair Corralation between Farmmi and Grand Havana

Given the investment horizon of 90 days Farmmi Inc is expected to under-perform the Grand Havana. But the stock apears to be less risky and, when comparing its historical volatility, Farmmi Inc is 1.3 times less risky than Grand Havana. The stock trades about -0.05 of its potential returns per unit of risk. The Grand Havana is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  0.12  in Grand Havana on August 30, 2024 and sell it today you would lose (0.05) from holding Grand Havana or give up 41.67% of portfolio value over 90 days.

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

Farmmi Inc  vs.  Grand Havana

Farmmi Inc

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Farmmi Inc are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite fairly fragile primary indicators, Farmmi demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Grand Havana

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Grand Havana has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Grand Havana is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Farmmi and Grand Havana

The main advantage of trading using opposite Farmmi and Grand Havana positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Farmmi position performs unexpectedly, Grand Havana 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 Grand Havana will offset losses from the drop in Grand Havana's long position.

The idea behind Farmmi Inc and Grand Havana 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.

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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.