Correlation Between Farmers Merchants and Home Bancorp
Can any of the company-specific risk be diversified away by investing in both Farmers Merchants and Home 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 Farmers Merchants and Home Bancorp 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 Home Bancorp, you can compare the effects of market volatilities on Farmers Merchants and Home 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 Farmers Merchants with a short position of Home Bancorp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Farmers Merchants and Home Bancorp.
Diversification Opportunities for Farmers Merchants and Home Bancorp
0.78 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Farmers and Home is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Farmers Merchants Bancorp and Home Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Home Bancorp 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 Home Bancorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Home Bancorp has no effect on the direction of Farmers Merchants i.e., Farmers Merchants and Home Bancorp go up and down completely randomly.
Pair Corralation between Farmers Merchants and Home Bancorp
Given the investment horizon of 90 days Farmers Merchants is expected to generate 1.38 times less return on investment than Home Bancorp. In addition to that, Farmers Merchants is 1.32 times more volatile than Home Bancorp. It trades about 0.02 of its total potential returns per unit of risk. Home Bancorp is currently generating about 0.03 per unit of volatility. If you would invest 3,771 in Home Bancorp on November 2, 2024 and sell it today you would earn a total of 1,137 from holding Home Bancorp or generate 30.15% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Farmers Merchants Bancorp vs. Home Bancorp
Performance |
| Timeline |
| Farmers Merchants Bancorp |
| Home Bancorp |
Farmers Merchants and Home Bancorp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Farmers Merchants and Home Bancorp
The main advantage of trading using opposite Farmers Merchants and Home Bancorp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Farmers Merchants position performs unexpectedly, Home 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 Home Bancorp will offset losses from the drop in Home Bancorp's 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 |
| Home Bancorp vs. Home Federal Bancorp | Home Bancorp vs. Community West Bancshares | Home Bancorp vs. First Financial Northwest | Home Bancorp 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.
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