Correlation Between Farmers National and National Bank
Can any of the company-specific risk be diversified away by investing in both Farmers National and National Bank 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 National Bank 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 National Bank Holdings, you can compare the effects of market volatilities on Farmers National and National Bank 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 National Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of Farmers National and National Bank.
Diversification Opportunities for Farmers National and National Bank
0.45 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Farmers and National is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Farmers National Banc and National Bank Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on National Bank Holdings 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 National Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of National Bank Holdings has no effect on the direction of Farmers National i.e., Farmers National and National Bank go up and down completely randomly.
Pair Corralation between Farmers National and National Bank
Given the investment horizon of 90 days Farmers National Banc is expected to generate 0.99 times more return on investment than National Bank. However, Farmers National Banc is 1.01 times less risky than National Bank. It trades about 0.2 of its potential returns per unit of risk. National Bank Holdings is currently generating about 0.11 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 | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Farmers National Banc vs. National Bank Holdings
Performance |
| Timeline |
| Farmers National Banc |
| National Bank Holdings |
Farmers National and National Bank Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Farmers National and National Bank
The main advantage of trading using opposite Farmers National and National Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Farmers National position performs unexpectedly, National Bank 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 National Bank will offset losses from the drop in National Bank'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 |
| National Bank vs. First Community | National Bank vs. Community West Bancshares | National Bank vs. First Financial Northwest | National Bank vs. First Northwest 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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