Correlation Between Farmers Merchants and Prospector Capital
Can any of the company-specific risk be diversified away by investing in both Farmers Merchants and Prospector Capital 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 Prospector Capital 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 Prospector Capital Corp, you can compare the effects of market volatilities on Farmers Merchants and Prospector Capital 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 Prospector Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of Farmers Merchants and Prospector Capital.
Diversification Opportunities for Farmers Merchants and Prospector Capital
0.86 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Farmers and Prospector is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Farmers Merchants Bancorp and Prospector Capital Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Prospector Capital Corp 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 Prospector Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Prospector Capital Corp has no effect on the direction of Farmers Merchants i.e., Farmers Merchants and Prospector Capital go up and down completely randomly.
Pair Corralation between Farmers Merchants and Prospector Capital
If you would invest 1,053 in Prospector Capital Corp on October 26, 2024 and sell it today you would earn a total of 0.00 from holding Prospector Capital Corp or generate 0.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 5.56% |
| Values | Daily Returns |
Farmers Merchants Bancorp vs. Prospector Capital Corp
Performance |
| Timeline |
| Farmers Merchants Bancorp |
| Prospector Capital Corp |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Farmers Merchants and Prospector Capital Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Farmers Merchants and Prospector Capital
The main advantage of trading using opposite Farmers Merchants and Prospector Capital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Farmers Merchants position performs unexpectedly, Prospector Capital 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 Prospector Capital will offset losses from the drop in Prospector Capital'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 |
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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