Correlation Between First Bancorp and Farmers National
Can any of the company-specific risk be diversified away by investing in both First Bancorp and Farmers National 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 First Bancorp and Farmers National into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between First Bancorp and Farmers National Banc, you can compare the effects of market volatilities on First Bancorp and Farmers National 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 First Bancorp with a short position of Farmers National. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Bancorp and Farmers National.
Diversification Opportunities for First Bancorp and Farmers National
0.68 | Correlation Coefficient |
Poor diversification
The 3 months correlation between First and Farmers is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding First Bancorp and Farmers National Banc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Farmers National Banc and First Bancorp 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 First Bancorp are associated (or correlated) with Farmers National. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Farmers National Banc has no effect on the direction of First Bancorp i.e., First Bancorp and Farmers National go up and down completely randomly.
Pair Corralation between First Bancorp and Farmers National
Given the investment horizon of 90 days First Bancorp is expected to generate 0.96 times more return on investment than Farmers National. However, First Bancorp is 1.04 times less risky than Farmers National. It trades about 0.2 of its potential returns per unit of risk. Farmers National Banc is currently generating about 0.17 per unit of risk. If you would invest 4,267 in First Bancorp on August 29, 2024 and sell it today you would earn a total of 591.00 from holding First Bancorp or generate 13.85% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
First Bancorp vs. Farmers National Banc
Performance |
| Timeline |
| First Bancorp |
| Farmers National Banc |
First Bancorp and Farmers National Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Bancorp and Farmers National
The main advantage of trading using opposite First Bancorp and Farmers National positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Bancorp position performs unexpectedly, Farmers National 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 National will offset losses from the drop in Farmers National's long position.| First Bancorp vs. Fifth Third Bancorp | First Bancorp vs. Huntington Bancshares Incorporated | First Bancorp vs. MT Bank |
| Farmers National vs. Fifth Third Bancorp | Farmers National vs. Huntington Bancshares Incorporated | Farmers National vs. MT Bank |
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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.
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