Correlation Between Farmers Merchants and Community Heritage
Can any of the company-specific risk be diversified away by investing in both Farmers Merchants and Community Heritage 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 Community Heritage 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 Community Heritage Financial, you can compare the effects of market volatilities on Farmers Merchants and Community Heritage 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 Community Heritage. Check out your portfolio center. Please also check ongoing floating volatility patterns of Farmers Merchants and Community Heritage.
Diversification Opportunities for Farmers Merchants and Community Heritage
0.73 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Farmers and Community is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Farmers Merchants Bancorp and Community Heritage Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Community Heritage 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 Community Heritage. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Community Heritage has no effect on the direction of Farmers Merchants i.e., Farmers Merchants and Community Heritage go up and down completely randomly.
Pair Corralation between Farmers Merchants and Community Heritage
Given the investment horizon of 90 days Farmers Merchants Bancorp is expected to generate 2.54 times more return on investment than Community Heritage. However, Farmers Merchants is 2.54 times more volatile than Community Heritage Financial. It trades about 0.13 of its potential returns per unit of risk. Community Heritage Financial is currently generating about 0.22 per unit of risk. If you would invest 96,625 in Farmers Merchants Bancorp on August 26, 2024 and sell it today you would earn a total of 6,975 from holding Farmers Merchants Bancorp or generate 7.22% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 90.91% |
| Values | Daily Returns |
Farmers Merchants Bancorp vs. Community Heritage Financial
Performance |
| Timeline |
| Farmers Merchants Bancorp |
| Community Heritage |
Farmers Merchants and Community Heritage Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Farmers Merchants and Community Heritage
The main advantage of trading using opposite Farmers Merchants and Community Heritage positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Farmers Merchants position performs unexpectedly, Community Heritage 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 Community Heritage will offset losses from the drop in Community Heritage'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 |
| Community Heritage vs. Washington Business Bank | Community Heritage vs. National Capital Bank | Community Heritage vs. Citizens Financial Corp | Community Heritage vs. North Dallas Bank |
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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
Other Complementary Tools
| Portfolio Center All portfolio management and optimization tools to improve performance of your portfolios | |
| Insider Screener Find insiders across different sectors to evaluate their impact on performance | |
| Bollinger Bands Use Bollinger Bands indicator to analyze target price for a given investing horizon | |
| Financial Widgets Easily integrated Macroaxis content with over 30 different plug-and-play financial widgets | |
| Stock Screener Find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook. |