Farmland's Correlation to Major Asset Classes (Video)
Video Transcript
So this slide may be a little confusing at first so I'll take a moment here.
This is each of these asset's correlation to farmland. So for each one of these lines here, you can think of them as, in the first one for example, timberland versus farmland, and then the Dow Jones REIT index versus farmland.
Even a moderate statistical relationship, or correlation coefficient, is a 0.6 and 0.8 is a strong correlation. Here we don't see any of that.
In fact, with the S&P there in the middle, you see almost exactly zero correlation and the same with REIT returns and just very little correlation with the rest of these asset classes.
Again that's what we're excited about with farmland is portfolio diversification.
The above content is not intended to be a comparison between products, but is intended for general, educational and informational purposes only. Any performance noted is historical and there is no guarantee any trends will continue. All investing involves risks, including the complete loss of principal. Diversification does not guarantee a profit or protect against loss in a declining market. It is important for each investor to review their investment objectives, risk tolerance, tax liability and liquidity needs before investing. Investment vehicles have differences in fee structure, risk factors and objectives. Investments are considered speculative, involve a high degree of risk and therefore are not suitable for all investors.
**Past performance does not guarantee future results and there is no guarantee this trend will continue**. Note: AcreTrader internal analysis covers periods 12/31/1990 - 12/31/2021. All returns are estimates and assume reinvestment of dividends. Index information is provided for illustrative purposes only and is not meant to represent the results of an actual investment. Returns do not include any management fees, transaction costs or expenses. Volatility is measured as the standard deviation using the monthly total returns of each index or asset class. The historical performance of each index cited is provided to illustrate historical market trends. Risk/reward profile for each asset class varies significantly. This should not be construed as a recommendation of any specific security. You cannot invest directly in an index.
Data source: Calculated by AcreTrader using information from Bloomberg, Federal Reserve Bank of St. Louis, NCREIF and NYU Stern School of Business. "Farmland" = NCREIF Farmland Index. "Timberland" = NCREIF Timber Index. "Commercial Real Estate" = NCREIF Property Index. "S&P" = Standard & Poor 500 Index. "REITs" = Dow Jones REIT Index. "CD" = Bankrate Historical 1-Year CD Interest Rates. "AAA" = ICE BofA AAA US Corporate Index. "U.S. Govt. Bonds" = U.S. Treasury 10-Year Bond.
