Correlation Between Home Federal and Farmers Merchants
Can any of the company-specific risk be diversified away by investing in both Home Federal 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 Home Federal and Farmers Merchants into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Home Federal Bancorp and Farmers Merchants Bancorp, you can compare the effects of market volatilities on Home Federal 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 Home Federal with a short position of Farmers Merchants. Check out your portfolio center. Please also check ongoing floating volatility patterns of Home Federal and Farmers Merchants.
Diversification Opportunities for Home Federal and Farmers Merchants
0.05 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Home and Farmers is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding Home Federal Bancorp 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 Home Federal 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 Home Federal Bancorp 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 Home Federal i.e., Home Federal and Farmers Merchants go up and down completely randomly.
Pair Corralation between Home Federal and Farmers Merchants
Given the investment horizon of 90 days Home Federal is expected to generate 9.54 times less return on investment than Farmers Merchants. But when comparing it to its historical volatility, Home Federal Bancorp is 1.31 times less risky than Farmers Merchants. It trades about 0.04 of its potential returns per unit of risk. Farmers Merchants Bancorp is currently generating about 0.32 of returns per unit of risk over similar time horizon. If you would invest 2,755 in Farmers Merchants Bancorp on September 2, 2024 and sell it today you would earn a total of 597.00 from holding Farmers Merchants Bancorp or generate 21.67% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Home Federal Bancorp vs. Farmers Merchants Bancorp
Performance |
| Timeline |
| Home Federal Bancorp |
| Farmers Merchants Bancorp |
Home Federal and Farmers Merchants Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Home Federal and Farmers Merchants
The main advantage of trading using opposite Home Federal and Farmers Merchants positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Home Federal 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.| Home Federal vs. Affinity Bancshares | Home Federal vs. Auburn National Bancorporation | Home Federal vs. BayCom Corp | Home Federal vs. Community West Bancshares |
| Farmers Merchants vs. Home Federal Bancorp | Farmers Merchants vs. First Financial Northwest | Farmers Merchants vs. First Northwest Bancorp | Farmers Merchants vs. First Capital |
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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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