Correlation Between Farmers Merchants and First Farmers
Can any of the company-specific risk be diversified away by investing in both Farmers Merchants and First Farmers 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 Farmers Merchants and First Farmers into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Farmers Merchants Bancorp and First Farmers Financial, you can compare the effects of market volatilities on Farmers Merchants and First Farmers 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 Farmers Merchants with a short position of First Farmers. Check out your portfolio center. Please also check ongoing floating volatility patterns of Farmers Merchants and First Farmers.
Diversification Opportunities for Farmers Merchants and First Farmers
-0.11 | Correlation Coefficient |
Good diversification
The 3 months correlation between Farmers and First is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding Farmers Merchants Bancorp and First Farmers Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Farmers Financial and Farmers Merchants 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 Farmers Merchants Bancorp are associated (or correlated) with First Farmers. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Farmers Financial has no effect on the direction of Farmers Merchants i.e., Farmers Merchants and First Farmers go up and down completely randomly.
Pair Corralation between Farmers Merchants and First Farmers
Given the investment horizon of 90 days Farmers Merchants Bancorp is expected to generate 1.43 times more return on investment than First Farmers. However, Farmers Merchants is 1.43 times more volatile than First Farmers Financial. It trades about 0.02 of its potential returns per unit of risk. First Farmers Financial is currently generating about 0.02 per unit of risk. If you would invest 2,576 in Farmers Merchants Bancorp on November 2, 2024 and sell it today you would earn a total of 177.00 from holding Farmers Merchants Bancorp or generate 6.87% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 80.97% |
| Values | Daily Returns |
Farmers Merchants Bancorp vs. First Farmers Financial
Performance |
| Timeline |
| Farmers Merchants Bancorp |
| First Farmers Financial |
Farmers Merchants and First Farmers Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Farmers Merchants and First Farmers
The main advantage of trading using opposite Farmers Merchants and First Farmers positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Farmers Merchants position performs unexpectedly, First Farmers 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 First Farmers will offset losses from the drop in First Farmers' long position.| Farmers Merchants vs. Home Federal Bancorp | Farmers Merchants vs. First Financial Northwest | Farmers Merchants vs. First Northwest Bancorp | Farmers Merchants vs. First Capital |
| First Farmers vs. Farmers Bancorp | First Farmers vs. Farmers Merchants Bancorp | First Farmers vs. Lakeland Financial | First Farmers vs. FFW Corporation |
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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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