Correlation Between NYSE Composite and First Farmers
Can any of the company-specific risk be diversified away by investing in both NYSE Composite and First Farmers 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 NYSE Composite and First Farmers into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NYSE Composite and First Farmers Financial, you can compare the effects of market volatilities on NYSE Composite and First Farmers 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 NYSE Composite with a short position of First Farmers. Check out your portfolio center. Please also check ongoing floating volatility patterns of NYSE Composite and First Farmers.
Diversification Opportunities for NYSE Composite and First Farmers
-0.35 | Correlation Coefficient |
Very good diversification
The 3 months correlation between NYSE and First is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding NYSE Composite and First Farmers Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Farmers Financial and NYSE Composite 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 NYSE Composite are associated (or correlated) with First Farmers. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Farmers Financial has no effect on the direction of NYSE Composite i.e., NYSE Composite and First Farmers go up and down completely randomly.
Pair Corralation between NYSE Composite and First Farmers
Assuming the 90 days trading horizon NYSE Composite is expected to generate 1.45 times more return on investment than First Farmers. However, NYSE Composite is 1.45 times more volatile than First Farmers Financial. It trades about 0.41 of its potential returns per unit of risk. First Farmers Financial is currently generating about 0.41 per unit of risk. If you would invest 1,925,354 in NYSE Composite on September 2, 2024 and sell it today you would earn a total of 101,850 from holding NYSE Composite or generate 5.29% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
NYSE Composite vs. First Farmers Financial
Performance |
| Timeline |
NYSE Composite and First Farmers Volatility Contrast
Predicted Return Density |
| Returns |
NYSE Composite
Pair trading matchups for NYSE Composite
First Farmers Financial
Pair trading matchups for First Farmers
Pair Trading with NYSE Composite and First Farmers
The main advantage of trading using opposite NYSE Composite and First Farmers positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NYSE Composite position performs unexpectedly, First Farmers 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 Farmers will offset losses from the drop in First Farmers' long position.| NYSE Composite vs. Simon Property Group | NYSE Composite vs. Merit Medical Systems | NYSE Composite vs. Catalent | NYSE Composite vs. Titan Machinery |
| First Farmers vs. Farmers Bancorp | First Farmers vs. Farmers Merchants Bancorp | First Farmers vs. Lakeland Financial | First Farmers vs. FFW Corporation |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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