Correlation Between Farmers Merchants and Prospera Energy
Can any of the company-specific risk be diversified away by investing in both Farmers Merchants and Prospera 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 Prospera 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 Prospera Energy, you can compare the effects of market volatilities on Farmers Merchants and Prospera 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 Prospera Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Farmers Merchants and Prospera Energy.
Diversification Opportunities for Farmers Merchants and Prospera Energy
-0.58 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Farmers and Prospera is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding Farmers Merchants Bancorp and Prospera Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Prospera 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 Prospera Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Prospera Energy has no effect on the direction of Farmers Merchants i.e., Farmers Merchants and Prospera Energy go up and down completely randomly.
Pair Corralation between Farmers Merchants and Prospera Energy
Given the investment horizon of 90 days Farmers Merchants Bancorp is expected to generate 0.24 times more return on investment than Prospera Energy. However, Farmers Merchants Bancorp is 4.21 times less risky than Prospera Energy. It trades about 0.04 of its potential returns per unit of risk. Prospera Energy is currently generating about -0.04 per unit of risk. If you would invest 95,143 in Farmers Merchants Bancorp on September 1, 2024 and sell it today you would earn a total of 9,457 from holding Farmers Merchants Bancorp or generate 9.94% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 95.21% |
| Values | Daily Returns |
Farmers Merchants Bancorp vs. Prospera Energy
Performance |
| Timeline |
| Farmers Merchants Bancorp |
| Prospera Energy |
Farmers Merchants and Prospera Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Farmers Merchants and Prospera Energy
The main advantage of trading using opposite Farmers Merchants and Prospera Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Farmers Merchants position performs unexpectedly, Prospera 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 Prospera Energy will offset losses from the drop in Prospera 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 |
| Prospera Energy vs. Petroleo Brasileiro Petrobras | Prospera Energy vs. Equinor ASA ADR | Prospera Energy vs. Eni SpA ADR | Prospera Energy vs. YPF Sociedad Anonima |
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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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