Correlation Between Farmers Bank and Sandy Spring

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

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

Diversification Opportunities for Farmers Bank and Sandy Spring

-0.19

Correlation Coefficient

Farmers Bank  Sandy Spring

Good diversification

The 3 months correlation between Farmers and Sandy is -0.19. Overlapping area represents the amount of risk that can be diversified away by holding The Farmers Bank and Sandy Spring Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sandy Spring Bancorp and Farmers 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 The Farmers Bank are associated (or correlated) with Sandy Spring. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sandy Spring Bancorp has no effect on the direction of Farmers Bank i.e., Farmers Bank and Sandy Spring go up and down completely randomly.

Pair Corralation between Farmers Bank and Sandy Spring

Given the investment horizon of 90 days The Farmers Bank is expected to generate 0.84 times more return on investment than Sandy Spring. However, The Farmers Bank is 1.19 times less risky than Sandy Spring. It trades about 0.06 of its potential returns per unit of risk. Sandy Spring Bancorp is currently generating about -0.13 per unit of risk. If you would invest  2,178  in The Farmers Bank on December 2, 2024 and sell it today you would earn a total of  107.00  from holding The Farmers Bank or generate 4.91% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	93.44%
Values	Daily Returns

The Farmers Bank  vs.  Sandy Spring Bancorp

Farmers Bank

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in The Farmers Bank are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Farmers Bank is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Sandy Spring Bancorp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Sandy Spring Bancorp has generated negative risk-adjusted returns adding no value to investors with long positions. Even with unfluctuating performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in April 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Pair Trading with Farmers Bank and Sandy Spring

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

The idea behind The Farmers Bank and Sandy Spring 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.