Correlation Between NYSE Composite and Farmers Merchants
Can any of the company-specific risk be diversified away by investing in both NYSE Composite 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 NYSE Composite and Farmers Merchants into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NYSE Composite and Farmers Merchants Bancorp, you can compare the effects of market volatilities on NYSE Composite 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 NYSE Composite with a short position of Farmers Merchants. Check out your portfolio center. Please also check ongoing floating volatility patterns of NYSE Composite and Farmers Merchants.
Diversification Opportunities for NYSE Composite and Farmers Merchants
0.54 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between NYSE and Farmers is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding NYSE Composite 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 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 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 NYSE Composite i.e., NYSE Composite and Farmers Merchants go up and down completely randomly.
Pair Corralation between NYSE Composite and Farmers Merchants
Assuming the 90 days trading horizon NYSE Composite is expected to generate 2.27 times less return on investment than Farmers Merchants. But when comparing it to its historical volatility, NYSE Composite is 4.22 times less risky than Farmers Merchants. It trades about 0.24 of its potential returns per unit of risk. Farmers Merchants Bancorp is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest 96,625 in Farmers Merchants Bancorp on August 26, 2024 and sell it today you would earn a total of 6,975 from holding Farmers Merchants Bancorp or generate 7.22% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
NYSE Composite vs. Farmers Merchants Bancorp
Performance |
| Timeline |
NYSE Composite and Farmers Merchants Volatility Contrast
Predicted Return Density |
| Returns |
NYSE Composite
Pair trading matchups for NYSE Composite
Farmers Merchants Bancorp
Pair trading matchups for Farmers Merchants
Pair Trading with NYSE Composite and Farmers Merchants
The main advantage of trading using opposite NYSE Composite and Farmers Merchants positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NYSE Composite 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.| NYSE Composite vs. Grocery Outlet Holding | NYSE Composite vs. Tencent Music Entertainment | NYSE Composite vs. SunLink Health Systems | NYSE Composite vs. Getty Realty |
| Farmers Merchants vs. PSB Holdings | Farmers Merchants vs. Eagle Financial Services | Farmers Merchants vs. National Capital Bank | Farmers Merchants vs. Community Heritage Financial |
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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.
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