Correlation Between Federated Premier and Farmers Merchants
Can any of the company-specific risk be diversified away by investing in both Federated Premier and Farmers Merchants 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 Federated Premier and Farmers Merchants into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Federated Premier Municipal and Farmers Merchants Bancorp, you can compare the effects of market volatilities on Federated Premier and Farmers Merchants 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 Federated Premier with a short position of Farmers Merchants. Check out your portfolio center. Please also check ongoing floating volatility patterns of Federated Premier and Farmers Merchants.
Diversification Opportunities for Federated Premier and Farmers Merchants
-0.5 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Federated and Farmers is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding Federated Premier Municipal and Farmers Merchants Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Farmers Merchants Bancorp and Federated Premier 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 Federated Premier Municipal are associated (or correlated) with Farmers Merchants. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Farmers Merchants Bancorp has no effect on the direction of Federated Premier i.e., Federated Premier and Farmers Merchants go up and down completely randomly.
Pair Corralation between Federated Premier and Farmers Merchants
Considering the 90-day investment horizon Federated Premier is expected to generate 1.37 times less return on investment than Farmers Merchants. But when comparing it to its historical volatility, Federated Premier Municipal is 2.44 times less risky than Farmers Merchants. It trades about 0.07 of its potential returns per unit of risk. Farmers Merchants Bancorp is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 93,780 in Farmers Merchants Bancorp on August 29, 2024 and sell it today you would earn a total of 15,670 from holding Farmers Merchants Bancorp or generate 16.71% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 91.67% |
| Values | Daily Returns |
Federated Premier Municipal vs. Farmers Merchants Bancorp
Performance |
| Timeline |
| Federated Premier |
| Farmers Merchants Bancorp |
Federated Premier and Farmers Merchants Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Federated Premier and Farmers Merchants
The main advantage of trading using opposite Federated Premier and Farmers Merchants positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Federated Premier position performs unexpectedly, Farmers Merchants 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 Farmers Merchants will offset losses from the drop in Farmers Merchants' long position.| Federated Premier vs. Gabelli Global Small | Federated Premier vs. MFS Investment Grade | Federated Premier vs. Eaton Vance National | Federated Premier vs. GAMCO Natural Resources |
| Farmers Merchants vs. Invesco High Income | Farmers Merchants vs. Blackrock Muniholdings Ny | Farmers Merchants vs. Nuveen California Select | Farmers Merchants vs. MFS Investment Grade |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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