Correlation Between Farmers and First National
Can any of the company-specific risk be diversified away by investing in both Farmers and First National 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 and First National into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Farmers And Merchants and First National Bank, you can compare the effects of market volatilities on Farmers and First National 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 with a short position of First National. Check out your portfolio center. Please also check ongoing floating volatility patterns of Farmers and First National.
Diversification Opportunities for Farmers and First National
0.73 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Farmers and First is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Farmers And Merchants and First National Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First National Bank and 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 Farmers And Merchants are associated (or correlated) with First National. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First National Bank has no effect on the direction of Farmers i.e., Farmers and First National go up and down completely randomly.
Pair Corralation between Farmers and First National
Given the investment horizon of 90 days Farmers And Merchants is expected to under-perform the First National. But the otc stock apears to be less risky and, when comparing its historical volatility, Farmers And Merchants is 1.11 times less risky than First National. The otc stock trades about -0.03 of its potential returns per unit of risk. The First National Bank is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest 21,338 in First National Bank on August 24, 2024 and sell it today you would earn a total of 2,462 from holding First National Bank or generate 11.54% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 99.19% |
| Values | Daily Returns |
Farmers And Merchants vs. First National Bank
Performance |
| Timeline |
| Farmers And Merchants |
| First National Bank |
Farmers and First National Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Farmers and First National
The main advantage of trading using opposite Farmers and First National positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Farmers position performs unexpectedly, First National 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 National will offset losses from the drop in First National's long position.| Farmers vs. First National Bank | Farmers vs. Farmers Merchants Bancorp | Farmers vs. Exchange Bank | Farmers vs. First National of |
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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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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