Correlation Between Prosperity Bancshares and Farmers Merchants
Can any of the company-specific risk be diversified away by investing in both Prosperity Bancshares 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 Prosperity Bancshares and Farmers Merchants into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Prosperity Bancshares and Farmers Merchants Bancorp, you can compare the effects of market volatilities on Prosperity Bancshares 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 Prosperity Bancshares with a short position of Farmers Merchants. Check out your portfolio center. Please also check ongoing floating volatility patterns of Prosperity Bancshares and Farmers Merchants.
Diversification Opportunities for Prosperity Bancshares and Farmers Merchants
0.76 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Prosperity and Farmers is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Prosperity Bancshares 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 Prosperity Bancshares 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 Prosperity Bancshares 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 Prosperity Bancshares i.e., Prosperity Bancshares and Farmers Merchants go up and down completely randomly.
Pair Corralation between Prosperity Bancshares and Farmers Merchants
Allowing for the 90-day total investment horizon Prosperity Bancshares is expected to generate 0.47 times more return on investment than Farmers Merchants. However, Prosperity Bancshares is 2.13 times less risky than Farmers Merchants. It trades about 0.3 of its potential returns per unit of risk. Farmers Merchants Bancorp is currently generating about -0.04 per unit of risk. If you would invest 7,468 in Prosperity Bancshares on November 2, 2024 and sell it today you would earn a total of 564.00 from holding Prosperity Bancshares or generate 7.55% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Prosperity Bancshares vs. Farmers Merchants Bancorp
Performance |
| Timeline |
| Prosperity Bancshares |
| Farmers Merchants Bancorp |
Prosperity Bancshares and Farmers Merchants Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Prosperity Bancshares and Farmers Merchants
The main advantage of trading using opposite Prosperity Bancshares and Farmers Merchants positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Prosperity Bancshares 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.| Prosperity Bancshares vs. Home Federal Bancorp | Prosperity Bancshares vs. Magyar Bancorp | Prosperity Bancshares vs. First Capital | Prosperity Bancshares vs. HomeTrust Bancshares |
| Farmers Merchants vs. Home Federal Bancorp | Farmers Merchants vs. Magyar Bancorp | Farmers Merchants vs. First Capital | Farmers Merchants vs. HomeTrust Bancshares |
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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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