Correlation Between First Farmers and Farmers Bancorp
Can any of the company-specific risk be diversified away by investing in both First Farmers 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 First Farmers and Farmers Bancorp 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 Farmers Bancorp, you can compare the effects of market volatilities on First Farmers 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 First Farmers with a short position of Farmers Bancorp. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Farmers and Farmers Bancorp.
Diversification Opportunities for First Farmers and Farmers Bancorp
0.67 | Correlation Coefficient |
Poor diversification
The 3 months correlation between First and Farmers is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding First Farmers Financial and Farmers Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Farmers Bancorp 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 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 First Farmers i.e., First Farmers and Farmers Bancorp go up and down completely randomly.
Pair Corralation between First Farmers and Farmers Bancorp
Given the investment horizon of 90 days First Farmers is expected to generate 2.66 times less return on investment than Farmers Bancorp. But when comparing it to its historical volatility, First Farmers Financial is 2.28 times less risky than Farmers Bancorp. It trades about 0.1 of its potential returns per unit of risk. Farmers Bancorp is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest 3,598 in Farmers Bancorp on November 28, 2024 and sell it today you would earn a total of 102.00 from holding Farmers Bancorp or generate 2.83% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.24% |
| Values | Daily Returns |
First Farmers Financial vs. Farmers Bancorp
Performance |
| Timeline |
| First Farmers Financial |
| Farmers Bancorp |
First Farmers and Farmers Bancorp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Farmers and Farmers Bancorp
The main advantage of trading using opposite First Farmers and Farmers Bancorp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Farmers 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.| First Farmers vs. Farmers Bancorp | First Farmers vs. Farmers Merchants Bancorp | First Farmers vs. Lakeland Financial | First Farmers vs. FFW Corporation |
| 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..
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