Correlation Between Affiliated Resources and Farmers Bancorp

Can any of the company-specific risk be diversified away by investing in both Affiliated Resources and Farmers Bancorp 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 Affiliated Resources and Farmers Bancorp into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Affiliated Resources Corp and Farmers Bancorp, you can compare the effects of market volatilities on Affiliated Resources and Farmers Bancorp 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 Affiliated Resources with a short position of Farmers Bancorp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Affiliated Resources and Farmers Bancorp.

Diversification Opportunities for Affiliated Resources and Farmers Bancorp

-0.45

Correlation Coefficient

Affiliated Resources  Farmers Bancorp

Very good diversification

The 3 months correlation between Affiliated and Farmers is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding Affiliated Resources Corp and Farmers Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Farmers Bancorp and Affiliated Resources 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 Affiliated Resources Corp are associated (or correlated) with Farmers Bancorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Farmers Bancorp has no effect on the direction of Affiliated Resources i.e., Affiliated Resources and Farmers Bancorp go up and down completely randomly.

Pair Corralation between Affiliated Resources and Farmers Bancorp

Given the investment horizon of 90 days Affiliated Resources Corp is expected to generate 13.3 times more return on investment than Farmers Bancorp. However, Affiliated Resources is 13.3 times more volatile than Farmers Bancorp. It trades about 0.03 of its potential returns per unit of risk. Farmers Bancorp is currently generating about -0.2 per unit of risk. If you would invest  8.50  in Affiliated Resources Corp on October 22, 2024 and sell it today you would lose (2.00) from holding Affiliated Resources Corp or give up 23.53% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	94.74%
Values	Daily Returns

Affiliated Resources Corp  vs.  Farmers Bancorp

Affiliated Resources Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Affiliated Resources Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent technical and fundamental indicators, Affiliated Resources is not utilizing all of its potentials. The newest stock price mess, may contribute to short-term losses for the institutional investors.

Farmers Bancorp

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Farmers Bancorp are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Even with relatively unfluctuating fundamental drivers, Farmers Bancorp may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Affiliated Resources and Farmers Bancorp

The main advantage of trading using opposite Affiliated Resources and Farmers Bancorp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Affiliated Resources position performs unexpectedly, Farmers Bancorp 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 Bancorp will offset losses from the drop in Farmers Bancorp's long position.

The idea behind Affiliated Resources Corp and Farmers Bancorp pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.