Correlation Between PSB Holdings and Farmers Merchants
Can any of the company-specific risk be diversified away by investing in both PSB Holdings 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 PSB Holdings and Farmers Merchants into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between PSB Holdings and Farmers Merchants Bancorp, you can compare the effects of market volatilities on PSB Holdings 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 PSB Holdings with a short position of Farmers Merchants. Check out your portfolio center. Please also check ongoing floating volatility patterns of PSB Holdings and Farmers Merchants.
Diversification Opportunities for PSB Holdings and Farmers Merchants
0.48 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between PSB and Farmers is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding PSB Holdings 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 PSB Holdings 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 PSB Holdings 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 PSB Holdings i.e., PSB Holdings and Farmers Merchants go up and down completely randomly.
Pair Corralation between PSB Holdings and Farmers Merchants
Given the investment horizon of 90 days PSB Holdings is expected to under-perform the Farmers Merchants. But the otc stock apears to be less risky and, when comparing its historical volatility, PSB Holdings is 1.83 times less risky than Farmers Merchants. The otc stock trades about -0.01 of its potential returns per unit of risk. The Farmers Merchants Bancorp is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 95,748 in Farmers Merchants Bancorp on October 26, 2024 and sell it today you would earn a total of 5,752 from holding Farmers Merchants Bancorp or generate 6.01% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
PSB Holdings vs. Farmers Merchants Bancorp
Performance |
| Timeline |
| PSB Holdings |
| Farmers Merchants Bancorp |
PSB Holdings and Farmers Merchants Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with PSB Holdings and Farmers Merchants
The main advantage of trading using opposite PSB Holdings and Farmers Merchants positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PSB Holdings 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.| PSB Holdings vs. Eagle Financial Services | PSB Holdings vs. National Capital Bank | PSB Holdings vs. Community Heritage Financial | PSB Holdings vs. Citizens Financial Corp |
| 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.
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