Correlation Between Farmers Merchants and Eagle Financial
Can any of the company-specific risk be diversified away by investing in both Farmers Merchants and Eagle Financial 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 Eagle Financial 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 Eagle Financial Services, you can compare the effects of market volatilities on Farmers Merchants and Eagle Financial 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 Eagle Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Farmers Merchants and Eagle Financial.
Diversification Opportunities for Farmers Merchants and Eagle Financial
0.73 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Farmers and Eagle is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Farmers Merchants Bancorp and Eagle Financial Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eagle Financial Services 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 Eagle Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eagle Financial Services has no effect on the direction of Farmers Merchants i.e., Farmers Merchants and Eagle Financial go up and down completely randomly.
Pair Corralation between Farmers Merchants and Eagle Financial
Given the investment horizon of 90 days Farmers Merchants is expected to generate 1.6 times less return on investment than Eagle Financial. But when comparing it to its historical volatility, Farmers Merchants Bancorp is 1.08 times less risky than Eagle Financial. It trades about 0.06 of its potential returns per unit of risk. Eagle Financial Services is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 2,946 in Eagle Financial Services on August 29, 2024 and sell it today you would earn a total of 524.00 from holding Eagle Financial Services or generate 17.79% 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. Eagle Financial Services
Performance |
| Timeline |
| Farmers Merchants Bancorp |
| Eagle Financial Services |
Farmers Merchants and Eagle Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Farmers Merchants and Eagle Financial
The main advantage of trading using opposite Farmers Merchants and Eagle Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Farmers Merchants position performs unexpectedly, Eagle Financial 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 Eagle Financial will offset losses from the drop in Eagle Financial's 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 |
| Eagle Financial vs. Chesapeake Finl Shs | Eagle Financial vs. Taylor Calvin B | Eagle Financial vs. PSB Holdings | Eagle Financial vs. Farmers Merchants Bancorp |
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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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