Correlation Between Farmers Merchants and Avanti Energy
Can any of the company-specific risk be diversified away by investing in both Farmers Merchants and Avanti Energy 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 Avanti Energy 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 Avanti Energy, you can compare the effects of market volatilities on Farmers Merchants and Avanti Energy 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 Avanti Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Farmers Merchants and Avanti Energy.
Diversification Opportunities for Farmers Merchants and Avanti Energy
-0.34 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Farmers and Avanti is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding Farmers Merchants Bancorp and Avanti Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Avanti Energy 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 Avanti Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Avanti Energy has no effect on the direction of Farmers Merchants i.e., Farmers Merchants and Avanti Energy go up and down completely randomly.
Pair Corralation between Farmers Merchants and Avanti Energy
Given the investment horizon of 90 days Farmers Merchants Bancorp is expected to under-perform the Avanti Energy. But the otc stock apears to be less risky and, when comparing its historical volatility, Farmers Merchants Bancorp is 8.0 times less risky than Avanti Energy. The otc stock trades about -0.01 of its potential returns per unit of risk. The Avanti Energy is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest 7.40 in Avanti Energy on November 27, 2024 and sell it today you would earn a total of 1.10 from holding Avanti Energy or generate 14.86% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 95.24% |
| Values | Daily Returns |
Farmers Merchants Bancorp vs. Avanti Energy
Performance |
| Timeline |
| Farmers Merchants Bancorp |
| Avanti Energy |
Farmers Merchants and Avanti Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Farmers Merchants and Avanti Energy
The main advantage of trading using opposite Farmers Merchants and Avanti Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Farmers Merchants position performs unexpectedly, Avanti Energy 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 Avanti Energy will offset losses from the drop in Avanti Energy's long position.| Farmers Merchants vs. PSB Holdings | Farmers Merchants vs. Eagle Financial Services | Farmers Merchants vs. National Capital Bank | Farmers Merchants vs. Community Heritage Financial |
| Avanti Energy vs. Desert Mountain Energy | Avanti Energy vs. Avanti Energy | Avanti Energy vs. Royal Helium | Avanti Energy vs. Total Helium |
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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.
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