Correlation Between First Community and Farmers Bank
Can any of the company-specific risk be diversified away by investing in both First Community and Farmers Bank 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 Community and Farmers Bank into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between First Community and The Farmers Bank, you can compare the effects of market volatilities on First Community and Farmers Bank 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 Community with a short position of Farmers Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Community and Farmers Bank.
Diversification Opportunities for First Community and Farmers Bank
-0.45 | Correlation Coefficient |
Very good diversification
The 3 months correlation between First and Farmers is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding First Community and The Farmers Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Farmers Bank and First Community 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 Community are associated (or correlated) with Farmers Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Farmers Bank has no effect on the direction of First Community i.e., First Community and Farmers Bank go up and down completely randomly.
Pair Corralation between First Community and Farmers Bank
Given the investment horizon of 90 days First Community is expected to under-perform the Farmers Bank. In addition to that, First Community is 1.71 times more volatile than The Farmers Bank. It trades about -0.1 of its total potential returns per unit of risk. The Farmers Bank is currently generating about 0.42 per unit of volatility. If you would invest 2,270 in The Farmers Bank on November 1, 2024 and sell it today you would earn a total of 86.00 from holding The Farmers Bank or generate 3.79% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
First Community vs. The Farmers Bank
Performance |
| Timeline |
| First Community |
| Farmers Bank |
First Community and Farmers Bank Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Community and Farmers Bank
The main advantage of trading using opposite First Community and Farmers Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Community position performs unexpectedly, Farmers Bank 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 Bank will offset losses from the drop in Farmers Bank's long position.| First Community vs. CCSB Financial Corp | First Community vs. Delhi Bank Corp | First Community vs. BEO Bancorp | First Community vs. First Community Financial |
| Farmers Bank vs. CIB Marine Bancshares | Farmers Bank vs. F M Bank | Farmers Bank vs. ENB Financial Corp | Farmers Bank vs. First Bankers Trustshares |
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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.
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