Correlation Between Farmers Merchants and Dow Jones
Can any of the company-specific risk be diversified away by investing in both Farmers Merchants and Dow Jones 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 Dow Jones 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 Dow Jones Industrial, you can compare the effects of market volatilities on Farmers Merchants and Dow Jones 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 Dow Jones. Check out your portfolio center. Please also check ongoing floating volatility patterns of Farmers Merchants and Dow Jones.
Diversification Opportunities for Farmers Merchants and Dow Jones
0.67 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Farmers and Dow is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Farmers Merchants Bancorp and Dow Jones Industrial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dow Jones Industrial 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 Dow Jones. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dow Jones Industrial has no effect on the direction of Farmers Merchants i.e., Farmers Merchants and Dow Jones go up and down completely randomly.
Pair Corralation between Farmers Merchants and Dow Jones
Given the investment horizon of 90 days Farmers Merchants Bancorp is expected to generate 2.52 times more return on investment than Dow Jones. However, Farmers Merchants is 2.52 times more volatile than Dow Jones Industrial. It trades about 0.14 of its potential returns per unit of risk. Dow Jones Industrial is currently generating about 0.16 per unit of risk. If you would invest 97,106 in Farmers Merchants Bancorp on August 30, 2024 and sell it today you would earn a total of 12,344 from holding Farmers Merchants Bancorp or generate 12.71% 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. Dow Jones Industrial
Performance |
| Timeline |
Farmers Merchants and Dow Jones Volatility Contrast
Predicted Return Density |
| Returns |
Farmers Merchants Bancorp
Pair trading matchups for Farmers Merchants
Dow Jones Industrial
Pair trading matchups for Dow Jones
Pair Trading with Farmers Merchants and Dow Jones
The main advantage of trading using opposite Farmers Merchants and Dow Jones positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Farmers Merchants position performs unexpectedly, Dow Jones 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 Dow Jones will offset losses from the drop in Dow Jones' long position.| Farmers Merchants vs. Invesco High Income | Farmers Merchants vs. Blackrock Muniholdings Ny | Farmers Merchants vs. Nuveen California Select | Farmers Merchants vs. MFS Investment Grade |
| Dow Jones vs. Kaltura | Dow Jones vs. Artisan Partners Asset | Dow Jones vs. US Global Investors | Dow Jones vs. Analog Devices |
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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
Other Complementary Tools
| ETFs Find actively traded Exchange Traded Funds (ETF) from around the world | |
| Alpha Finder Use alpha and beta coefficients to find investment opportunities after accounting for the risk | |
| Pair Correlation Compare performance and examine fundamental relationship between any two equity instruments | |
| Portfolio Diagnostics Use generated alerts and portfolio events aggregator to diagnose current holdings | |
| Economic Indicators Top statistical indicators that provide insights into how an economy is performing |