Correlation Between Farmers Bancorp and Swedbank

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

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

Diversification Opportunities for Farmers Bancorp and Swedbank

-0.22

Correlation Coefficient

Farmers Bancorp  Swedbank

Very good diversification

The 3 months correlation between Farmers and Swedbank is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding Farmers Bancorp and Swedbank AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Swedbank AB 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 Swedbank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Swedbank AB has no effect on the direction of Farmers Bancorp i.e., Farmers Bancorp and Swedbank go up and down completely randomly.

Pair Corralation between Farmers Bancorp and Swedbank

Given the investment horizon of 90 days Farmers Bancorp is expected to generate 1.13 times more return on investment than Swedbank. However, Farmers Bancorp is 1.13 times more volatile than Swedbank AB. It trades about 0.12 of its potential returns per unit of risk. Swedbank AB is currently generating about 0.05 per unit of risk. If you would invest  3,250  in Farmers Bancorp on October 15, 2024 and sell it today you would earn a total of  380.00  from holding Farmers Bancorp or generate 11.69% return on investment over 90 days.

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

Farmers Bancorp  vs.  Swedbank AB

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.

Swedbank AB

Risk-Adjusted Performance

3 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Swedbank AB are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong fundamental drivers, Swedbank is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Farmers Bancorp and Swedbank

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

The idea behind Farmers Bancorp and Swedbank AB 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.