Correlation Between Freedom Bank and Farmers Merchants
Can any of the company-specific risk be diversified away by investing in both Freedom Bank 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 Freedom Bank and Farmers Merchants into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Freedom Bank of and Farmers Merchants Bancorp, you can compare the effects of market volatilities on Freedom Bank 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 Freedom Bank with a short position of Farmers Merchants. Check out your portfolio center. Please also check ongoing floating volatility patterns of Freedom Bank and Farmers Merchants.
Diversification Opportunities for Freedom Bank and Farmers Merchants
0.18 | Correlation Coefficient |
Average diversification
The 3 months correlation between Freedom and Farmers is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding Freedom Bank 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 Freedom Bank 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 Freedom Bank 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 Freedom Bank i.e., Freedom Bank and Farmers Merchants go up and down completely randomly.
Pair Corralation between Freedom Bank and Farmers Merchants
Given the investment horizon of 90 days Freedom Bank is expected to generate 2.56 times less return on investment than Farmers Merchants. But when comparing it to its historical volatility, Freedom Bank of is 1.46 times less risky than Farmers Merchants. It trades about 0.02 of its potential returns per unit of risk. Farmers Merchants Bancorp is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 94,900 in Farmers Merchants Bancorp on September 12, 2024 and sell it today you would earn a total of 11,350 from holding Farmers Merchants Bancorp or generate 11.96% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 80.92% |
| Values | Daily Returns |
Freedom Bank of vs. Farmers Merchants Bancorp
Performance |
| Timeline |
| Freedom Bank |
| Farmers Merchants Bancorp |
Freedom Bank and Farmers Merchants Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Freedom Bank and Farmers Merchants
The main advantage of trading using opposite Freedom Bank and Farmers Merchants positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Freedom Bank 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.| Freedom Bank vs. HUMANA INC | Freedom Bank vs. Barloworld Ltd ADR | Freedom Bank vs. Morningstar Unconstrained Allocation | Freedom Bank vs. Thrivent High Yield |
| Farmers Merchants vs. Freedom Bank of | Farmers Merchants vs. HUMANA INC | Farmers Merchants vs. Barloworld Ltd ADR | Farmers Merchants vs. Morningstar Unconstrained Allocation |
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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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