Correlation Between MFS Investment and Farmers Merchants

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

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

Diversification Opportunities for MFS Investment and Farmers Merchants

-0.23

Correlation Coefficient

MFS Investment  Farmers Merchants

Very good diversification

The 3 months correlation between MFS and Farmers is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding MFS Investment Grade 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 MFS Investment 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 MFS Investment Grade 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 MFS Investment i.e., MFS Investment and Farmers Merchants go up and down completely randomly.

Pair Corralation between MFS Investment and Farmers Merchants

Considering the 90-day investment horizon MFS Investment Grade is expected to generate 0.37 times more return on investment than Farmers Merchants. However, MFS Investment Grade is 2.72 times less risky than Farmers Merchants. It trades about 0.03 of its potential returns per unit of risk. Farmers Merchants Bancorp is currently generating about -0.06 per unit of risk. If you would invest  785.00  in MFS Investment Grade on December 28, 2024 and sell it today you would earn a total of  6.00  from holding MFS Investment Grade or generate 0.76% return on investment over 90 days.

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

MFS Investment Grade  vs.  Farmers Merchants Bancorp

MFS Investment Grade

Risk-Adjusted Performance

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in MFS Investment Grade are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong basic indicators, MFS Investment is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

Farmers Merchants Bancorp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Farmers Merchants Bancorp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong fundamental indicators, Farmers Merchants is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with MFS Investment and Farmers Merchants

The main advantage of trading using opposite MFS Investment and Farmers Merchants positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MFS Investment 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.

The idea behind MFS Investment Grade and Farmers Merchants 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.