Correlation Between Farmers National and First Merchants
Can any of the company-specific risk be diversified away by investing in both Farmers National and First 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 Farmers National and First Merchants 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 Merchants, you can compare the effects of market volatilities on Farmers National and First 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 Farmers National with a short position of First Merchants. Check out your portfolio center. Please also check ongoing floating volatility patterns of Farmers National and First Merchants.
Diversification Opportunities for Farmers National and First Merchants
0.68 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Farmers and First is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Farmers National Banc and First Merchants in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Merchants 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 Merchants. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Merchants has no effect on the direction of Farmers National i.e., Farmers National and First Merchants go up and down completely randomly.
Pair Corralation between Farmers National and First Merchants
Given the investment horizon of 90 days Farmers National is expected to generate 1.54 times less return on investment than First Merchants. But when comparing it to its historical volatility, Farmers National Banc is 1.1 times less risky than First Merchants. It trades about 0.17 of its potential returns per unit of risk. First Merchants is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest 3,716 in First Merchants on August 29, 2024 and sell it today you would earn a total of 713.00 from holding First Merchants or generate 19.19% 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 Merchants
Performance |
| Timeline |
| Farmers National Banc |
| First Merchants |
Farmers National and First Merchants Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Farmers National and First Merchants
The main advantage of trading using opposite Farmers National and First Merchants positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Farmers National position performs unexpectedly, First 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 First Merchants will offset losses from the drop in First Merchants' long position.| Farmers National vs. Fifth Third Bancorp | Farmers National vs. Huntington Bancshares Incorporated | Farmers National vs. MT Bank |
| First Merchants vs. Fifth Third Bancorp | First Merchants vs. Huntington Bancshares Incorporated | First Merchants vs. MT Bank |
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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.
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