Correlation Between Exchange Bank and Farmers

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

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

Diversification Opportunities for Exchange Bank and Farmers

0.12

Correlation Coefficient

Exchange Bank  Farmers

Average diversification

The 3 months correlation between Exchange and Farmers is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding Exchange Bank and Farmers And Merchants in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Farmers And Merchants and Exchange Bank 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 Exchange Bank are associated (or correlated) with Farmers. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Farmers And Merchants has no effect on the direction of Exchange Bank i.e., Exchange Bank and Farmers go up and down completely randomly.

Pair Corralation between Exchange Bank and Farmers

Given the investment horizon of 90 days Exchange Bank is expected to generate 6.78 times more return on investment than Farmers. However, Exchange Bank is 6.78 times more volatile than Farmers And Merchants. It trades about 0.05 of its potential returns per unit of risk. Farmers And Merchants is currently generating about 0.03 per unit of risk. If you would invest  10,450  in Exchange Bank on December 29, 2024 and sell it today you would earn a total of  750.00  from holding Exchange Bank or generate 7.18% return on investment over 90 days.

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

Exchange Bank  vs.  Farmers And Merchants

Exchange Bank

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Exchange Bank are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Exchange Bank may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Farmers And Merchants

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Farmers And Merchants are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent fundamental drivers, Farmers is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Exchange Bank and Farmers

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

The idea behind Exchange Bank and Farmers And Merchants 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.

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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.