Correlation Between Dow Jones and Farmers Bancorp
Can any of the company-specific risk be diversified away by investing in both Dow Jones and Farmers Bancorp 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 Dow Jones and Farmers Bancorp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Dow Jones Industrial and Farmers Bancorp, you can compare the effects of market volatilities on Dow Jones and Farmers Bancorp 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 Dow Jones with a short position of Farmers Bancorp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and Farmers Bancorp.
Diversification Opportunities for Dow Jones and Farmers Bancorp
-0.06 | Correlation Coefficient |
Good diversification
The 3 months correlation between Dow and Farmers is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and Farmers Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Farmers Bancorp and Dow Jones 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 Dow Jones Industrial are associated (or correlated) with Farmers Bancorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Farmers Bancorp has no effect on the direction of Dow Jones i.e., Dow Jones and Farmers Bancorp go up and down completely randomly.
Pair Corralation between Dow Jones and Farmers Bancorp
Assuming the 90 days trading horizon Dow Jones is expected to generate 1.58 times less return on investment than Farmers Bancorp. But when comparing it to its historical volatility, Dow Jones Industrial is 1.36 times less risky than Farmers Bancorp. It trades about 0.16 of its potential returns per unit of risk. Farmers Bancorp is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest 3,263 in Farmers Bancorp on August 30, 2024 and sell it today you would earn a total of 287.00 from holding Farmers Bancorp or generate 8.8% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 97.73% |
| Values | Daily Returns |
Dow Jones Industrial vs. Farmers Bancorp
Performance |
| Timeline |
Dow Jones and Farmers Bancorp Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
Farmers Bancorp
Pair trading matchups for Farmers Bancorp
Pair Trading with Dow Jones and Farmers Bancorp
The main advantage of trading using opposite Dow Jones and Farmers Bancorp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, Farmers Bancorp 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 Bancorp will offset losses from the drop in Farmers Bancorp's long position.| Dow Jones vs. Skillful Craftsman Education | Dow Jones vs. Acco Brands | Dow Jones vs. Cracker Barrel Old | Dow Jones vs. Coursera |
| Farmers Bancorp vs. First Farmers Financial | Farmers Bancorp vs. Farmers Merchants Bancorp | Farmers Bancorp vs. Lakeland Financial | Farmers Bancorp vs. Eagle Financial Services |
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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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