Correlation Between First Farmers and Eagle Financial
Can any of the company-specific risk be diversified away by investing in both First Farmers and Eagle Financial 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 Farmers and Eagle Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between First Farmers Financial and Eagle Financial Services, you can compare the effects of market volatilities on First Farmers and Eagle Financial 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 Farmers with a short position of Eagle Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Farmers and Eagle Financial.
Diversification Opportunities for First Farmers and Eagle Financial
0.74 | Correlation Coefficient |
Poor diversification
The 3 months correlation between First and Eagle is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding First Farmers Financial and Eagle Financial Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eagle Financial Services and First Farmers 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 Farmers Financial are associated (or correlated) with Eagle Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eagle Financial Services has no effect on the direction of First Farmers i.e., First Farmers and Eagle Financial go up and down completely randomly.
Pair Corralation between First Farmers and Eagle Financial
Given the investment horizon of 90 days First Farmers is expected to generate 1.45 times less return on investment than Eagle Financial. But when comparing it to its historical volatility, First Farmers Financial is 1.25 times less risky than Eagle Financial. It trades about 0.02 of its potential returns per unit of risk. Eagle Financial Services is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest 3,387 in Eagle Financial Services on November 2, 2024 and sell it today you would earn a total of 238.00 from holding Eagle Financial Services or generate 7.03% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 99.26% |
| Values | Daily Returns |
First Farmers Financial vs. Eagle Financial Services
Performance |
| Timeline |
| First Farmers Financial |
| Eagle Financial Services |
First Farmers and Eagle Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Farmers and Eagle Financial
The main advantage of trading using opposite First Farmers and Eagle Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Farmers position performs unexpectedly, Eagle Financial 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 Eagle Financial will offset losses from the drop in Eagle Financial's long position.| First Farmers vs. Farmers Bancorp | First Farmers vs. Farmers Merchants Bancorp | First Farmers vs. Lakeland Financial | First Farmers vs. FFW Corporation |
| Eagle Financial vs. Chesapeake Finl Shs | Eagle Financial vs. Taylor Calvin B | Eagle Financial vs. PSB Holdings | Eagle Financial vs. Farmers Merchants Bancorp |
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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.
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