Correlation Between Alpine Banks and Farmers Merchants
Can any of the company-specific risk be diversified away by investing in both Alpine Banks and Farmers Merchants 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 Alpine Banks and Farmers Merchants into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Alpine Banks of and Farmers Merchants Bancorp, you can compare the effects of market volatilities on Alpine Banks and Farmers Merchants 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 Alpine Banks with a short position of Farmers Merchants. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alpine Banks and Farmers Merchants.
Diversification Opportunities for Alpine Banks and Farmers Merchants
0.03 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Alpine and Farmers is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding Alpine Banks of and Farmers Merchants Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Farmers Merchants Bancorp and Alpine Banks 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 Alpine Banks of are associated (or correlated) with Farmers Merchants. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Farmers Merchants Bancorp has no effect on the direction of Alpine Banks i.e., Alpine Banks and Farmers Merchants go up and down completely randomly.
Pair Corralation between Alpine Banks and Farmers Merchants
Assuming the 90 days horizon Alpine Banks is expected to generate 4.34 times less return on investment than Farmers Merchants. But when comparing it to its historical volatility, Alpine Banks of is 3.24 times less risky than Farmers Merchants. It trades about 0.01 of its potential returns per unit of risk. Farmers Merchants Bancorp is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest 2,576 in Farmers Merchants Bancorp on November 2, 2024 and sell it today you would earn a total of 177.00 from holding Farmers Merchants Bancorp or generate 6.87% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 99.8% |
| Values | Daily Returns |
Alpine Banks of vs. Farmers Merchants Bancorp
Performance |
| Timeline |
| Alpine Banks |
| Farmers Merchants Bancorp |
Alpine Banks and Farmers Merchants Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Alpine Banks and Farmers Merchants
The main advantage of trading using opposite Alpine Banks and Farmers Merchants positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alpine Banks position performs unexpectedly, Farmers Merchants 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 Merchants will offset losses from the drop in Farmers Merchants' long position.The idea behind Alpine Banks of and Farmers Merchants Bancorp 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.| Farmers Merchants vs. Home Federal Bancorp | Farmers Merchants vs. First Financial Northwest | Farmers Merchants vs. First Northwest Bancorp | Farmers Merchants vs. First Capital |
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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.
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