Correlation Between Independent Bank and Farmers National
Can any of the company-specific risk be diversified away by investing in both Independent Bank and Farmers National 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 Independent Bank and Farmers National into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Independent Bank and Farmers National Banc, you can compare the effects of market volatilities on Independent Bank and Farmers National 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 Independent Bank with a short position of Farmers National. Check out your portfolio center. Please also check ongoing floating volatility patterns of Independent Bank and Farmers National.
Diversification Opportunities for Independent Bank and Farmers National
0.75 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Independent and Farmers is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Independent Bank and Farmers National Banc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Farmers National Banc and Independent Bank 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 Independent Bank are associated (or correlated) with Farmers National. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Farmers National Banc has no effect on the direction of Independent Bank i.e., Independent Bank and Farmers National go up and down completely randomly.
Pair Corralation between Independent Bank and Farmers National
Given the investment horizon of 90 days Independent Bank is expected to generate 1.11 times more return on investment than Farmers National. However, Independent Bank is 1.11 times more volatile than Farmers National Banc. It trades about 0.2 of its potential returns per unit of risk. Farmers National Banc is currently generating about 0.2 per unit of risk. If you would invest 3,254 in Independent Bank on September 1, 2024 and sell it today you would earn a total of 509.00 from holding Independent Bank or generate 15.64% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Independent Bank vs. Farmers National Banc
Performance |
| Timeline |
| Independent Bank |
| Farmers National Banc |
Independent Bank and Farmers National Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Independent Bank and Farmers National
The main advantage of trading using opposite Independent Bank and Farmers National positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Independent Bank position performs unexpectedly, Farmers National 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 National will offset losses from the drop in Farmers National's long position.| Independent Bank vs. First Northwest Bancorp | Independent Bank vs. Community West Bancshares | Independent Bank vs. First Financial Northwest | Independent Bank vs. Great Southern Bancorp |
| Farmers National vs. Affinity Bancshares | Farmers National vs. Southern California Bancorp | Farmers National vs. Auburn National Bancorporation | Farmers National vs. BayCom Corp |
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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