Correlation Between CVR Energy and Farmers Bancorp

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

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

Diversification Opportunities for CVR Energy and Farmers Bancorp

-0.34

Correlation Coefficient

CVR Energy  Farmers Bancorp

Very good diversification

The 3 months correlation between CVR and Farmers is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding CVR Energy and Farmers Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Farmers Bancorp and CVR Energy 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 CVR Energy 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 CVR Energy i.e., CVR Energy and Farmers Bancorp go up and down completely randomly.

Pair Corralation between CVR Energy and Farmers Bancorp

Considering the 90-day investment horizon CVR Energy is expected to under-perform the Farmers Bancorp. In addition to that, CVR Energy is 3.73 times more volatile than Farmers Bancorp. It trades about -0.05 of its total potential returns per unit of risk. Farmers Bancorp is currently generating about 0.0 per unit of volatility. If you would invest  3,525  in Farmers Bancorp on September 5, 2024 and sell it today you would lose (20.00) from holding Farmers Bancorp or give up 0.57% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

CVR Energy  vs.  Farmers Bancorp

CVR Energy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CVR Energy has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in January 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Farmers Bancorp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Farmers Bancorp has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable fundamental drivers, Farmers Bancorp is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with CVR Energy and Farmers Bancorp

The main advantage of trading using opposite CVR Energy and Farmers Bancorp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CVR Energy 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 CVR Energy 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.