Correlation Between First Farmers and FFW
Can any of the company-specific risk be diversified away by investing in both First Farmers and FFW 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 FFW 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 FFW Corporation, you can compare the effects of market volatilities on First Farmers and FFW 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 FFW. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Farmers and FFW.
Diversification Opportunities for First Farmers and FFW
-0.15 | Correlation Coefficient |
Good diversification
The 3 months correlation between First and FFW is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding First Farmers Financial and FFW Corp. in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FFW Corporation 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 FFW. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FFW Corporation has no effect on the direction of First Farmers i.e., First Farmers and FFW go up and down completely randomly.
Pair Corralation between First Farmers and FFW
Given the investment horizon of 90 days First Farmers is expected to generate 2.24 times less return on investment than FFW. But when comparing it to its historical volatility, First Farmers Financial is 1.0 times less risky than FFW. It trades about 0.04 of its potential returns per unit of risk. FFW Corporation is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 3,069 in FFW Corporation on October 21, 2024 and sell it today you would earn a total of 931.00 from holding FFW Corporation or generate 30.34% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 81.42% |
| Values | Daily Returns |
First Farmers Financial vs. FFW Corp.
Performance |
| Timeline |
| First Farmers Financial |
| FFW Corporation |
First Farmers and FFW Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Farmers and FFW
The main advantage of trading using opposite First Farmers and FFW positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Farmers position performs unexpectedly, FFW 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 FFW will offset losses from the drop in FFW's long position.| First Farmers vs. Farmers Bancorp | First Farmers vs. Farmers Merchants Bancorp | First Farmers vs. Lakeland Financial | First Farmers vs. FFW Corporation |
| FFW vs. First Farmers Financial | FFW vs. Farmers Merchants Bancorp | FFW vs. Lakeland Financial | FFW 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.
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