Correlation Between Potomac Bancshares and Farmers Bank
Can any of the company-specific risk be diversified away by investing in both Potomac Bancshares and Farmers Bank 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 Potomac Bancshares and Farmers Bank into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Potomac Bancshares and The Farmers Bank, you can compare the effects of market volatilities on Potomac Bancshares and Farmers Bank 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 Potomac Bancshares with a short position of Farmers Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of Potomac Bancshares and Farmers Bank.
Diversification Opportunities for Potomac Bancshares and Farmers Bank
-0.04 | Correlation Coefficient |
Good diversification
The 3 months correlation between Potomac and Farmers is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding Potomac Bancshares and The Farmers Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Farmers Bank and Potomac 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 Potomac Bancshares are associated (or correlated) with Farmers Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Farmers Bank has no effect on the direction of Potomac Bancshares i.e., Potomac Bancshares and Farmers Bank go up and down completely randomly.
Pair Corralation between Potomac Bancshares and Farmers Bank
Given the investment horizon of 90 days Potomac Bancshares is expected to generate 1.74 times more return on investment than Farmers Bank. However, Potomac Bancshares is 1.74 times more volatile than The Farmers Bank. It trades about 0.02 of its potential returns per unit of risk. The Farmers Bank is currently generating about 0.01 per unit of risk. If you would invest 1,598 in Potomac Bancshares on August 29, 2024 and sell it today you would earn a total of 52.00 from holding Potomac Bancshares or generate 3.25% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 84.15% |
| Values | Daily Returns |
Potomac Bancshares vs. The Farmers Bank
Performance |
| Timeline |
| Potomac Bancshares |
| Farmers Bank |
Potomac Bancshares and Farmers Bank Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Potomac Bancshares and Farmers Bank
The main advantage of trading using opposite Potomac Bancshares and Farmers Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Potomac Bancshares position performs unexpectedly, Farmers Bank 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 Bank will offset losses from the drop in Farmers Bank's long position.| Potomac Bancshares vs. Apollo Bancorp | Potomac Bancshares vs. The Farmers Bank | Potomac Bancshares vs. Community Bankers | Potomac Bancshares vs. CCSB Financial Corp |
| Farmers Bank vs. CIB Marine Bancshares | Farmers Bank vs. F M Bank | Farmers Bank vs. ENB Financial Corp | Farmers Bank vs. First Bankers Trustshares |
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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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