Correlation Between Farmers Merchants and BASF SE
Can any of the company-specific risk be diversified away by investing in both Farmers Merchants and BASF SE 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 BASF SE 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 BASF SE NA, you can compare the effects of market volatilities on Farmers Merchants and BASF SE 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 BASF SE. Check out your portfolio center. Please also check ongoing floating volatility patterns of Farmers Merchants and BASF SE.
Diversification Opportunities for Farmers Merchants and BASF SE
-0.69 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Farmers and BASF is -0.69. Overlapping area represents the amount of risk that can be diversified away by holding Farmers Merchants Bancorp and BASF SE NA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BASF SE NA 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 BASF SE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BASF SE NA has no effect on the direction of Farmers Merchants i.e., Farmers Merchants and BASF SE go up and down completely randomly.
Pair Corralation between Farmers Merchants and BASF SE
Given the investment horizon of 90 days Farmers Merchants Bancorp is expected to generate 0.67 times more return on investment than BASF SE. However, Farmers Merchants Bancorp is 1.49 times less risky than BASF SE. It trades about 0.02 of its potential returns per unit of risk. BASF SE NA is currently generating about 0.0 per unit of risk. If you would invest 96,628 in Farmers Merchants Bancorp on August 31, 2024 and sell it today you would earn a total of 7,972 from holding Farmers Merchants Bancorp or generate 8.25% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 93.93% |
| Values | Daily Returns |
Farmers Merchants Bancorp vs. BASF SE NA
Performance |
| Timeline |
| Farmers Merchants Bancorp |
| BASF SE NA |
Farmers Merchants and BASF SE Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Farmers Merchants and BASF SE
The main advantage of trading using opposite Farmers Merchants and BASF SE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Farmers Merchants position performs unexpectedly, BASF SE 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 BASF SE will offset losses from the drop in BASF SE'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 |
| BASF SE vs. Shin Etsu Chemical Co | BASF SE vs. BASF SE ADR | BASF SE vs. Braskem SA Class | BASF SE vs. Celanese |
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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.
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