Correlation Between FFW and Farmers Merchants
Can any of the company-specific risk be diversified away by investing in both FFW 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 FFW and Farmers Merchants into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between FFW Corporation and Farmers Merchants Bancorp, you can compare the effects of market volatilities on FFW 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 FFW with a short position of Farmers Merchants. Check out your portfolio center. Please also check ongoing floating volatility patterns of FFW and Farmers Merchants.
Diversification Opportunities for FFW and Farmers Merchants
-0.2 | Correlation Coefficient |
Good diversification
The 3 months correlation between FFW and Farmers is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding FFW Corp. 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 FFW 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 FFW Corporation 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 FFW i.e., FFW and Farmers Merchants go up and down completely randomly.
Pair Corralation between FFW and Farmers Merchants
Given the investment horizon of 90 days FFW Corporation is expected to generate 0.54 times more return on investment than Farmers Merchants. However, FFW Corporation is 1.87 times less risky than Farmers Merchants. It trades about 0.11 of its potential returns per unit of risk. Farmers Merchants Bancorp is currently generating about 0.05 per unit of risk. If you would invest 3,435 in FFW Corporation on November 28, 2024 and sell it today you would earn a total of 465.00 from holding FFW Corporation or generate 13.54% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 55.15% |
| Values | Daily Returns |
FFW Corp. vs. Farmers Merchants Bancorp
Performance |
| Timeline |
| FFW Corporation |
| Farmers Merchants Bancorp |
FFW and Farmers Merchants Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with FFW and Farmers Merchants
The main advantage of trading using opposite FFW and Farmers Merchants positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if FFW 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.| FFW vs. First Farmers Financial | FFW vs. Farmers Merchants Bancorp | FFW vs. Lakeland Financial | FFW vs. Eagle Financial Services |
| Farmers Merchants vs. Home Federal Bancorp | Farmers Merchants vs. First Financial Northwest | Farmers Merchants vs. First Northwest Bancorp | Farmers Merchants vs. First Capital |
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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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