Correlation Between Farmers Bancorp and Community Heritage

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

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

Diversification Opportunities for Farmers Bancorp and Community Heritage

0.84

Correlation Coefficient

Farmers Bancorp  Community Heritage

Very poor diversification

The 3 months correlation between Farmers and Community is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Farmers Bancorp and Community Heritage Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Community Heritage and Farmers Bancorp 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 Farmers Bancorp are associated (or correlated) with Community Heritage. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Community Heritage has no effect on the direction of Farmers Bancorp i.e., Farmers Bancorp and Community Heritage go up and down completely randomly.

Pair Corralation between Farmers Bancorp and Community Heritage

Given the investment horizon of 90 days Farmers Bancorp is expected to generate 1.53 times more return on investment than Community Heritage. However, Farmers Bancorp is 1.53 times more volatile than Community Heritage Financial. It trades about 0.13 of its potential returns per unit of risk. Community Heritage Financial is currently generating about 0.17 per unit of risk. If you would invest  3,425  in Farmers Bancorp on September 14, 2024 and sell it today you would earn a total of  375.00  from holding Farmers Bancorp or generate 10.95% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.41%
Values	Daily Returns

Farmers Bancorp  vs.  Community Heritage Financial

Farmers Bancorp

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Farmers Bancorp are ranked lower than 10 (%) 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 January 2025.

Community Heritage

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Community Heritage Financial are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile technical indicators, Community Heritage may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Farmers Bancorp and Community Heritage

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

The idea behind Farmers Bancorp and Community Heritage Financial 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.