Correlation Between Farmers National and First Bancorp
Can any of the company-specific risk be diversified away by investing in both Farmers National and First Bancorp 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 National and First Bancorp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Farmers National Banc and First Bancorp, you can compare the effects of market volatilities on Farmers National and First Bancorp 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 National with a short position of First Bancorp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Farmers National and First Bancorp.
Diversification Opportunities for Farmers National and First Bancorp
0.72 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Farmers and First is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Farmers National Banc and First Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Bancorp and Farmers National 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 National Banc are associated (or correlated) with First Bancorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Bancorp has no effect on the direction of Farmers National i.e., Farmers National and First Bancorp go up and down completely randomly.
Pair Corralation between Farmers National and First Bancorp
Given the investment horizon of 90 days Farmers National Banc is expected to generate 1.03 times more return on investment than First Bancorp. However, Farmers National is 1.03 times more volatile than First Bancorp. It trades about 0.2 of its potential returns per unit of risk. First Bancorp is currently generating about 0.2 per unit of risk. If you would invest 1,376 in Farmers National Banc on September 1, 2024 and sell it today you would earn a total of 189.00 from holding Farmers National Banc or generate 13.74% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Farmers National Banc vs. First Bancorp
Performance |
| Timeline |
| Farmers National Banc |
| First Bancorp |
Farmers National and First Bancorp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Farmers National and First Bancorp
The main advantage of trading using opposite Farmers National and First Bancorp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Farmers National position performs unexpectedly, First Bancorp 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 First Bancorp will offset losses from the drop in First Bancorp's long position.| Farmers National vs. Affinity Bancshares | Farmers National vs. Southern California Bancorp | Farmers National vs. Auburn National Bancorporation | Farmers National vs. BayCom Corp |
| First Bancorp vs. Home Bancorp | First Bancorp vs. First Business Financial | First Bancorp vs. LINKBANCORP | First Bancorp vs. Great Southern 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
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